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On September 1st, Royal Canadian Securities analyst Abbas Keshwani commented that given the yens weakness, the Bank of Japan (BOJ) may raise interest rates or intervene in the foreign exchange market in the coming weeks. The yen has weakened over the past month, and recent depreciation has already offset much of the BOJs intervention efforts over the past few months. Keshwani stated that for the yen to appreciate significantly, the BOJ would need to adopt an aggressive rate hike cycle, but it is unlikely to do so at the expense of economic growth. He added, "The BOJ may raise interest rates to a level sufficient to prevent the yen from weakening excessively until the Japanese government bond market stabilizes next year, thus creating conditions for a yen recovery."On September 1st, BCA Research analyst Felix Wezina-Poirier stated in a report that volatility in government bond yields is expected to be a significant factor influencing risk asset prices. Sovereign bond yields have risen to multi-year highs due to inflation concerns triggered by high oil prices. Wezina-Poirier stated, "For equities, the absolute level of yields is less important than the speed of change; therefore, implied interest rate volatility is a more useful indicator for measuring equity market risk." However, Federal Reserve Chairman Warshs remarks last week signaled a readiness to take action to curb inflation, which should help keep yield volatility at a relatively controlled level.September 1st news: Voyah Automobile delivered 13,003 vehicles in August 2026, and a total of 102,456 vehicles from January to August 2026, representing a year-on-year increase of 25%.Micron Technology (MU.O) shares fell 1.5% in pre-market trading.Both WTI and Brent crude oil rose by $0.60 in the short term, currently trading at $86.28 per barrel and $91.44 per barrel respectively.

GBP/USD falls to around 1.2370 as the BoE considers taking swift action ahead of UK inflation and US purchasing managers' indices

Alina Haynes

Apr 17, 2023 13:53

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On Monday morning, the GBP/USD currency pair retested an intraday low of 1.2390 after extending Sunday's decline from a 10-month high. To provoke adverse after breaking a four-week uptrend, the Cable pair explains the most recent concerns emanating from the United Kingdom (UK) and the optimism surrounding the Federal Reserve (Fed).

 

According to the Financial Times (FT), "The Bank of England is considering a major overhaul of its deposit guarantee scheme, including increasing the amount covered for businesses and compelling banks to pre-fund the system to a greater extent to ensure faster access to cash when a lender collapses."  The revelation fuels banking concerns in the United Kingdom and places pressure on the Cable duo.

 

UK Chancellor Jeremy Hunt's concerns about US subsidies may also be exerting downward pressure on the GBP/USD exchange rate as British firms rush to claim benefits before leaving the country. According to the news, "Chancellor Jeremy Hunt warned Sky News that Britain should be wary of any new subsidies, warning that they could undermine the economy and possibly even spark a protectionist trade war."

 

A larger-than-expected decline in US retail sales was unable to offset positive data from US industrial production and the University of Michigan's (UoM) consumer confidence index from the previous day. Despite this, US retail sales decreased by 1.0% in March compared to the predicted -0.4% decline and February's -0.2% decline. As opposed to the 0.2% market consensus and previous reading, Industrial Production increased by 0.4% in the month in question. The preliminary result of the University of Michigan's (UoM) Consumer Confidence Index for April, which increased to 63.5 from 62.0 analysts' expectations and previous readings, was also encouraging. In addition, inflation forecasts for the next year increased from 3.6% in March to 4.6% in April, while inflation forecasts for the next five years decreased by 2.9% during the same month.

 

Notably, Fed officials have recently appeared more hawkish than their BoE counterparts, which has exerted additional pressure on the GBP/USD exchange rate.

 

In this environment, the S&P 500 Futures exhibit modest gains following Wall Street's pessimistic close, while bond yields remain unchanged following weekly increases.

 

Moving forward, the current week is crucial for GBP/USD speculators as it contains a variety of high-quality inflation, employment, and UK PMI data. These data may be used to support the Bank of England's (BoE) officials' waning hawkish inclination and may keep bears in play. However, the US PMIs and Fed discussions should not be disregarded when looking for clear guidelines.

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