The GBP/JPY currency pair edged higher to near 187.90 during the European session on Monday, with trading activity subdued due to Japan’s observance of Mountain Day. Market participants are now focused on upcoming UK economic reports, including monthly employment data set for release on Tuesday, followed by consumer inflation figures on Wednesday. These reports are expected to provide fresh insights into the UK’s economic conditions, potentially influencing the Bank of England‘s (BoE) future monetary policy decisions.
On Monday, Bank of England policymaker Catherine Mann voiced concerns in a Financial Times podcast regarding the persistent growth in UK wages, highlighting it as a significant factor for inflation. Despite the main inflation rate holding steady at the BoE’s 2% target in June, Mann remains apprehensive about possible upward pressures on prices.
The GBP/JPY pair’s upward movement could face limitations as Japan’s monetary policy outlook suggests that Bank of Japan (BoJ) officials may consider further rate hikes. However, they are proceeding cautiously due to the increased market volatility observed last week.
Moreover, the GBP/JPY cross may encounter additional challenges from safe-haven flows driven by escalating geopolitical tensions in the Middle East. ABC News reported that early Monday, the Israel Defense Forces (IDF) intercepted around 30 projectiles crossing from Lebanon into northern Israel. Additionally, Reuters reported that an Israeli airstrike targeting a school compound in Gaza on Saturday resulted in at least 90 fatalities, further intensifying the conflict.
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