GBP/JPY slumps over 200 pips to 165.00, set for worst day since early March By Frank_Macro GBPJPY BOE BOJ
the form of the March highs. At current levels just above the big figure, GBP/JPY trades with on the day losses of about 1.3%, which would mark the pair’s worst one-day drop since 4 March, when FX markets were experiencing a period of severe risk-off with the Russo-Ukraine war having only begun one week earlier.
Since then, FX market focus turned more to the inflationary impact of the way and currencies began trading more as a function of central bank policy divergence rather than risk appetite. At 165.00, GBP/JPY is still trading more than 9.0% above its sub-151.00 March lows, mostly as a function of the yen getting absolutely battered in the last few weeks on the idea that thewould leave its policy settings unchanged as other major central banks tighten to tackle inflation.
BoJ policy was in focus earlier on Friday, with Governor Hurahiko Kuroda doubling down on his dovish stance that 1) inflation, though higher in the short-term, isn’t yet showing signs of meeting the BoJ’s long-term 2.0% goal, meaning 2) it remains appropriate to maintain the policies of negative interestand yield curve control. Those remarks saw the yen weaken at the time, and GBP/JPY momentarily rally from under 165.00 to the upper 165.00s.
But the pair has since turned lower, primarily as a result of safe-haven flows out of the more risk-sensitive pound into the yen as selling pressure in US equity markets built. Whilst risk-off is one reason why GBP/JPY is lower on Thursday , another factor weighing heavily on pound sterling was Friday’s very weak UK data.
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