Mar 14, 2023 14:26
In the early Asian session, the GBP/JPY pair is evaluating an intermediate cushion above 162.00 after detecting restrictions in the upside momentum above 163. As investors become concerned about the United Kingdom's labor cost index, which has occupied the Bank of England (BoE) with high inflation issues for the past year, the cross is expected to resume its upward trend.
The release of the UK's Employment data will be the primary catalyst for the British Pound in the near future. Claimant Count Change (Feb) is expected to decline by 12.4K compared to the previous release of 12.9K. The three-month Unemployment Rate is expected to increase to 3.8% from the previous release of 3.7%.
The primary catalyst will be the Average Earnings data, which is anticipated to decrease to 5.7% from the previous release of 5.9%. Investors should be aware that higher employment costs and persistent food price inflation in the British economy have fueled inflationary pressures. And now, a decline in the labor cost index will please Bank of England Governor Andrew Bailey, who is losing sleep over devising a strategy to slow the double-digit inflation rate.
It is essential to observe that the failure of Silicon Valley Bank (SVB) has repercussions outside of the United States. In a joint statement from the UK Treasury and the Bank of England (BOE) on Monday, Jeremy Hunt, the minister of finance, stated that "deposits will be protected without taxpayer support." The UK authorities have confirmed that HSBC has agreed to rescue Silicon Valley Bank's (SVB) UK subsidiary. UK Hunt added, "These actions have no direct material impact on any other British institutions."
Following the announcement of unchanged monetary policy by former Bank of Japan (BoJ) Governor Haruhiko Kuroda, investors are shifting their focus to BoJ Kazuo Ueda's commentary on the Yield Curve Control (YCC) and a transition to restrictive monetary policy.
Alvin Liew, senior economist at UOB Group, believes that Japan's exit from the YCC and negative interest rates are inevitable; the question is how Ueda will implement his plan. We anticipate a gradual, well-communicated change in Ueda's pace, as opposed to a sudden one. We see it as two primary steps: 1) Protracted adjustment to its forward guidance on YCC and interest rates (April to December 2023) and 2) Elimination of YCC and abolition of the negative policy rate in early 2024."