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GBP/JPY Steadies Near Two-Week Highs as Traders Weigh Weak UK Data
Traders' Opinions
Summary:
The Pound held firm near two-week highs against the Yen on Thursday despite a grim batch of UK economic data revealing weaker-than-expected growth and contracting industrial output, suggesting that the Bank of England could be nearing another rate cut. Meanwhile, the Japanese Yen struggled to find strength as political pressure kept the Bank of Japan’s policy stance dovish.
Buy
TradingGBPJPY
EXP
203.801
Entry Price
205.500
TP
202.200
SL
203.428 -0.377 -0.18%
0
Point
Flat
202.200
SL
CLOSING
203.801
Entry Price
205.500
TP
The British Pound managed to hold its ground against the Japanese Yen on Thursday, hovering around ¥203.50 — close to two-week highs — despite a string of disappointing UK macroeconomic figures that once again raised fears about Britain’s fragile economic health. The currency pair’s resilience highlights that, for now, broader sentiment and yield differentials remain supportive of the Pound, even as the data paints a bleak picture of an economy losing steam.
According to preliminary data released earlier in the day, the UK economy expanded by just 0.1% in the third quarter, falling short of the 0.2% forecast and down sharply from the 0.3% growth recorded in the second quarter. On an annual basis, growth came in at 1.3%, slightly below the anticipated 1.4%, underscoring the challenges the British economy faces amid weak demand, high borrowing costs, and ongoing fiscal strain.
Manufacturing and industrial output were particularly alarming. Manufacturing production contracted by 1.7%, a much deeper fall than the 0.3% decline economists had expected, while industrial production slumped by 2.0% month-on-month, far worse than the projected 0.2% dip. The data followed a downward revision in August’s manufacturing output, which now shows a modest 0.6% increase, pointing to a broader industrial slowdown.
These figures add to mounting evidence that the UK’s post-pandemic recovery is losing momentum faster than policymakers at the Bank of England (BoE) had hoped. With inflation easing but growth faltering, pressure is intensifying on Governor Andrew Bailey and his colleagues to deliver a rate cut by December to prevent a deeper contraction. Markets are now pricing in a higher probability of a policy pivot, especially as consumer confidence remains subdued and the housing sector shows further signs of fatigue.
Still, the Pound’s muted reaction suggests traders are already looking past the near-term data, focusing instead on relative monetary policy differentials. While the BoE may soon shift toward easing, the Bank of Japan (BoJ) remains locked in ultra-loose monetary settings — a key factor limiting the Yen’s ability to recover.
In Japan, the Yen continues to face persistent weakness, failing to capitalize on the disappointing UK numbers. Recent remarks from Prime Minister Sanae Takaichi, urging the BoJ to maintain its accommodative stance, have further dampened speculation about a near-term policy tightening. That message effectively squashed hopes for a December rate hike, keeping the Yen under heavy selling pressure. The currency’s underperformance has been exacerbated by widening yield spreads, as Japanese investors continue seeking higher returns overseas amid stagnant domestic rates.
Technical Analysis
From a technical perspective, the GBP/JPY pair has entered a consolidation phase after rallying strongly in previous sessions. The pair remains supported above the 201.70 level — a critical line in confirming the broader bullish bias. Despite stochastic indicators signaling temporary exhaustion near overbought territory, the pair’s sideways movement suggests a phase of accumulation before another potential upward move.
If buyers manage to maintain momentum above the 203.10 region, a break above 203.95 could open the door to fresh gains targeting 204.65 and 205.50. Conversely, a drop below 202.50 might trigger a short-term pullback, but overall sentiment remains constructive as long as the pair stays above its near-term support zone.
TRADE RECOMMENDATION
BUY GBPJPY
ENTRY PRICE: 203.50
STOP LOSS: 202.200
TAKE PROFIT: 205.50
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