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Asset Watch
Thursday, November 2, 2023
Markets await the Bank of England’s interest rate decision due today, with the expectation that it will remain unchanged at 5.25%. It is widely expected that the bank will keep the rate unchanged at 5.25%. This anticipation is fueled by a recent decrease in inflation levels and softer labor market data in the UK. Additionally, there might be a reduction in the number of votes in favor of increasing interest rates within the Bank of England. In the previous meeting, a slim majority of 5 to 4 voted to maintain interest rates, with one of the four members who favored raising rates completing their term. The new member is unlikely to vote against the prevailing majority.
On the other hand, the Bank of Japan disappointed the markets by maintaining its existing monetary policy. It decided to continue controlling the yield curve and expanded the tolerance ceiling for bond yields from 1% to 1.25%. This measure aims to sustain low yields on Japanese 10-year bonds, supporting the country’s economy.
This absence of a change in monetary policy resulted in the strengthening of the US dollar against the Japanese yen, breaching the 150 threshold. If the yen continues to depreciate, investors are anticipating potential intervention by the Japanese government in the foreign exchange market, involving the sale of dollars to bolster the yen.
Chart source ADSS Platform
On October 3, the GBP/JPY fell to a multi-week lows at 178.03. Subsequently, the pair rebounded as some traders locked in profits. However, the price traded in a trendless move creating lower highs with higher lows.
Currently, the GBP/JPY ligers in a trading zone of 178.95-184.47 and could be on its way for a test of the low end of that zone. A daily close below this low end might encourage some traders to push the pair toward 173.56. Nevertheless, the support level situated at 176.30 should be considered.
On the other hand, any U-tur accompanied with daily close above high end of that trading zone, indicates that some traders could rally the price towards 187.80. In this scenario, the resistance level located at 187.17 should be kept in focus.
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