The price of the Japanese Yen remains under immense pressure due to the Central Bank and Japan’s general economic outlook. The GBP/JPY is one of the most popularly traded CFD pairs, with high exchange volumes. The price movement of the GBP/JPY is currently lower than the market open and is one of the few Yen currency pairs which is witnessing a decline.
The GBP/JPY pair is being influenced mainly by the British Pound which is declining against all competitors. However, traders are also being cautious about trading long on the Yen which is generally performing poorly. Looking at the price movement of the instrument, we can see that the trend has clearly been against the GBP since the 21st of June, and is seeing even stronger momentum today as traders abandon the Pound.
The price, however, has reached a previous support level which has provided some reinforcement for the instrument since the 15th June. The support level can clearly be seen on the chart at the 161.323 mark. Traders are looking to see if the price is able to maintain momentum and cross to a lower low. At the same time, some analysts are not confident that the JPY can maintain momentum while the Japanese Yen Index continues to decline.
The British Pound is mainly being influenced by the market’s uncertainty as the Prime Minister is due to be released from his duties soon and the Conversative Party is yet to confirm a new leader. There are currently 11 politicians on the list of contenders for Prime Minister with Mr Sunak, Penny Mordaunt, and Liz Truss retaining the greatest chances of winning, according to experts. Many expect that any future successor will most likely look to support the economy through tax cuts and a more competitive national insurance contribution policy. This may lead to economic growth, which has recently stalled, but may come in conflict with the Central Bank which is looking to lower inflation.
The Japanese Yen has declined against many currencies since the speech by The Bank of Japan Governor Haruhiko Kuroda, who warned of a very high level of uncertainty in the economic outlook. The Central Bank governor also reiterated his willingness to ramp up stimulus as needed to support the fragile recovery of the national economy. The official recalled that short-term and long-term interest rates would remain at the current level or lower for a long time. The very dovish tone of the regulator and his outlook on the Japanese economy is piling further pressure on an already-struggling currency.
Today, traders will mainly be concentrating on any developments regarding the potential next UK Prime Minister, as well as the scheduled speech by the Bank of England governor this evening. Investors will be listening closely to any comments which the governor may have on the potential successor and their alterations to the fiscal policy.
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