Ella 
GBP/JPY attracted some selling around the 186.00 round-figure mark on Thursday and continued to trade lower during the early European session. Spot prices fell to fresh intraday lows around the 185.15-185.10 area in the past hour, reversing some of the previous day’s rally to a more than one-week high.
Disappointing U.S. macroeconomic data on Wednesday was seen as a sign that the surprisingly resilient U.S. economy may be starting to lose steam after a rapid rise in interest rates. Also, mixed Chinese purchasing managers’ indices (PMI) did little to ease fears of a further global downturn, prompting some safe-haven flows to the Japanese yen (JPY) and a key factor dragging GBP/JPY lower .
Further support for the yen was provided by better-than-expected retail sales in Japan, which rose 6.8% on an annualized basis in July, helping to offset a larger 2.0% drop in industrial production in the monthly report. That said, the dovish outlook from the Bank of Japan (BoJ) should limit any meaningful JPY appreciation moves and help limit GBP/JPY downside, at least for now.
Notably, the Bank of Japan is the only central bank in the world to maintain negative interest rates and is expected to stick to its current ultra-loose monetary policy stance. In fact, Bank of Japan board member Toyoaki Nakamura said on Thursday that it was too early to tighten monetary policy because the recent rise in inflation was largely driven by rising import costs rather than wage growth. Bank of Japan Governor Kazuo Ueda also made dovish comments last week, saying Japan’s underlying inflation rate remained slightly below the 2 percent target.
That ensures the BOJ is likely to maintain the status quo until next summer. In contrast, the Bank of England is expected to continue its policy tightening cycle to combat high inflation. This bet was reaffirmed by comments from Bank of England Deputy Governor Ben Broadbent, who said policy rates would likely have to be adjusted for some time as the knock-on effects of the price surge were unlikely to fade quickly. Stay in restricted areas. In addition, BoE chief economist Huw Pill noted that UK inflation remains “too high”.
Peel added that there was no room for complacency when it came to inflation and that there was a lot of policy on the horizon. So, caution is needed before placing aggressive bearish bets around GBP/JPY crosses. As such, it would be prudent to wait for strong follow-through selling before taking a position on the recent pullback from its highest level since November 2015 hit earlier this month.
