The GBP/JPY currency pair refers to the exchange rate of the British Pound against the Japanese Yen in the Forex market. This pair is one of many currency pairs that are traded in the global market. It is considered one of the highly liquid pairs in Forex, which means that it can be traded in large quantities without negatively affecting the price.
The price of the GBP/JPY currency pair is affected by many factors, including economic and political events in the United Kingdom and Japan, as well as global factors such as global economic developments, geopolitical risks and geopolitical developments.
Trading the GBP/JPY currency pair requires a good understanding of the financial markets, technical and fundamental analysis, as well as risk management and an effective trading strategy. Traders should be aware that Forex trading involves financial risks, and they should be careful and only invest what they can afford to lose.
- Liquidity and trading:
The GBP/JPY pair is highly liquid and attracts investors due to large price fluctuations, providing attractive trading opportunities.
– This pair is mainly traded in the Asian and European trading period.
- Influencing factors:
Fluctuations in the GBP/JPY rate can be affected by several factors, including economic growth reports, monetary policy decisions, and stock market fluctuations. Developments in the British and Japanese economies, including unemployment and GDP indicators, can also affect this. the husband.
- Technical Analysis: Traders use technical analysis to analyze charts and identify potential trends and potential entry and exit points.
– Support, resistance and technical indicators such as the Relative Strength Index (RSI) and moving averages can be useful in analyzing price action.
- Risk and Money Management: Traders must understand the risks associated with forex trading and adopt an effective money management strategy.
Fundamental factors affecting forecast GBP/JPY
Bank of England’s monetary policy
The primary tool used by the Bank of England, the central bank of the United Kingdom, to control inflation and influence the exchange rate of the national currency is to implement changes in the interest rate. If the interest rate rises, the exchange rate of the pound sterling rises, while a lower interest rate causes the exchange rate to fall. Since December 2021, the Bank of England has implemented a series of interest rate increases to curb rising inflation.
The rate increased from 0.1% to 5.25% during this period. The Bank of England’s Monetary Policy Committee aims to meet the inflation target of 2%. In October 2023, the CPI increased by 6.7% compared to 2022 figures.
Therefore, further action on interest rates will depend on economic data. If UK GDP falls and signs of recession appear, it could negatively affect the pound’s exchange rate, with the GBP pair under pressure. Conversely, strong GDP growth and rising inflation could prompt regulators to raise interest rates again, strengthening GBP against the yen.
Bank of Japan monetary policy
Japan’s economy has been in a state of contraction for more than two decades. It means a decrease in the general level of prices of goods and services, which is a phenomenon opposite to inflation, which negatively affects the growth rate of the economy. Therefore, the Bank of Japan and the country’s government have made numerous efforts to stamp out deflation. They used a zero interest rate and implemented quantitative easing to inject additional cash into the economy.
The low interest rate of the Japanese yen has made it an attractive option for investments and lending. Japan has seen more than a year of high core inflation, with the ratio exceeding the central bank’s target of 2%
Forecast GBP/JPY in the coming years and the impact of economic tensions
The Economic Forecasting Agency (EFA) comes with the forecast GBP/JPY that the exchange rate of the pound will rise to the yen and stabilize at 203.04 by the end of 2024, 222.14 by the end of 2025, and 244.40 by the end of 2026.
The GBPJPY followed a one-sided path throughout the year, starting at the 155-point mark and peaking at 188.00 in late 2023. However, subsequent attempts to push higher faltered, and the GBP/JPY pair was It is slowly falling towards the psychological level at 180.00. Indicating signs of waning momentum in its months-long vertical climb.
The pair’s forward progress was hampered after breaking below the trend line, weighed down in part by growing speculation that the Bank of Japan may prepare to shift towards tighter monetary policy. In addition, there is an emerging feeling among Japanese officials that a stronger yen may be desirable.
The short-term GBPPY forecast points towards range targets at 1.80-1.90, while the long-term price outlook for GBPPY is bearish amid speculation that the spread in the interest rate between the two currencies will narrow in 2024 – JPY forecasts require a break below the key support at 180.00 and a trend reversal.
As inflation slowed, the UK central bank temporarily paused raising interest rates from August 2023. The regulator sees risks of a potential slowdown in the country’s economy due to the significant tightening of credit conditions.
If the yen depreciates too quickly, the Bank of Japan may resort to foreign exchange interventions by buying the yen against the pound, which may exert short-term pressure on the GBP-yen exchange rate.
This trend continues, and the pair’s prices could rise further. A downward correction could begin if the UK shows signs of an emerging recession, or the Bank of Japan decides to raise interest rates.
