The GBP/JPY currency pair ended its four-day winning streak, trading around 191.60 during Friday’s Asian trading hours. This decline is largely attributed to the strengthened Japanese Yen (JPY), which has gained momentum following the recent growth in Japan’s second-quarter GDP. This economic growth has heightened expectations for a near-term interest rate hike by the Bank of Japan (BoJ).
Despite this, the JPY faces potential volatility due to political uncertainty in Japan. Japanese Prime Minister Fumio Kishida announced on Wednesday that he will not seek re-election as the leader of the Liberal Democratic Party (LDP) in September, adding to market uncertainty.
Conversely, stronger-than-expected U.S. Retail Sales data has alleviated concerns about a potential U.S. recession, improving risk sentiment and potentially benefiting the risk-sensitive Pound Sterling (GBP). This positive shift in sentiment could limit further declines in the GBP/JPY cross.
The British Pound is also supported by favorable economic data from the United Kingdom (UK) released on Thursday. The UK economy expanded by 0.6% quarter-on-quarter in the second quarter, in line with expectations, and showed a 0.9% year-on-year increase, up from the 0.3% recorded in Q1.
Traders are now awaiting the release of UK Retail Sales data scheduled for Friday. Expectations are for a month-on-month rebound to a 0.5% increase in July, recovering from the previous decline of 1.2%. Annual growth is forecasted to rise by 1.4%, reversing an earlier decline of 0.2%.
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