GBP/JPY is an upward trend, the duration of which is as much as 3 years, but the best dynamics were shown last year, thanks to which this currency pair has become the most profitable for traders in 2023. This achievement was made possible not due to the outstanding performance of the British economy or high demand for risk assets as a whole, but due to Japanese monetary policy, and even the status of a safe asset did not change the situation for the yen. At the same time, the Bank of Japan does not seem to be at all worried about the weakening of its currency, but on the contrary continues to contribute to it. Rumors about changes in monetary policy still remain rumors. In any case, a rally in Japanese interest rates is considered unrealistic, and the Japanese economy is unlikely to be able to strengthen the yen, so a further rally in the rates is quite possible, but also limited. Only for 6 months in 2014-2015 we have been seeing the yen higher than it is now against the pound.
This week's focus is on the Bank of England meeting. It is expected that the policy rate of 5.25% will not be revised this time, remaining at the maximum. The recent inflation report showing a serious decline in inflation leaves no chance for a rate hike and a strengthening of the pound. The manufacturing business activity index fell to 47 pips in January, adding to pressure on the pound.
Industrial production in Japan showed weak growth in December of just 1.8%. At the same time, it became known that unemployment had decreased to 2.4%. All these factors combined allowed the yen to strengthen this week, as there was more negativity around the pound.
Most technical analysis tools indicate the effectiveness of short trades. We consider this signal to be correct, since after testing the maximum, quotes began to decline. Thus, a price correction has begun, which at highs can be very significant. Therefore, today we are opening the deals to Sell.
