The GBP/JPY pair has retreated from its recent highs near the 200-day SMA, despite the release of positive UK economic data. While the UK economy showed resilience in the second quarter, with retail sales and industrial production exceeding expectations, the Pound Sterling failed to gain significant traction.
The market’s focus remains on the diverging monetary policy paths of the Bank of England (BoE) and the Bank of Japan (BoJ). While the BoE is expected to cut interest rates later this year, the BoJ is anticipated to implement another rate hike before the end of 2024. This divergence in monetary policy is likely to cap GBP/JPY’s upside potential.
Technical Outlook
The pair is currently consolidating after its recent rally, with the 200-day SMA acting as resistance. A sustained move below this level could indicate a potential reversal of the uptrend.