Japan’s core consumer prices marked their eight consecutive month of annual drops in October, citing the steep scale of the central bank’s difficulties in beating deflation and a flat growth with reduction of policy options.
Policymakers would likely struggle to initiate stimulating the economy given the data results, and fiscal spending as being the most preferred alternative after the three-year aggressive easing by the Bank of Japan (BoJ) had failed to boost inflation to its 2 percent target.
With a disappointing data on energy price easing, along with the recent decline of the yen, which sent import costs to rally, some analysts are still expecting a rebound in consumer prices as early as next year.
Meanwhile, the nationwide core consumer price index, including oil products declined by about 0.4 percent in October from a year earlier after a 0.5 percent slump was seen in September, which matched a median market estimate, according to government data.
Almost 60 percent of the items making up the index have seen prices rallying, despite declining gasoline and electricity prices continued to pull down inflation.
Britain’s Unexpected Booming
Before the European Union referendum, George Osborne stated that if citizens will vote for Brexit then there’s no other choice but to hold an emergency budget, which implies that there will be a cutting of public spending as well as raises on taxes in order to cover a £30billion black hole.
He also mentioned that NHS funding could suffer, in which both inheritance and income tax are expected to rise.
As it turned out, Mr. Osborne could hardly have been more wrong as there is no emergency budget and he was out on his ear as soon as David Cameron had been replaced in Number 10.
GBP/JPY Retraces 23.6% of the Sell-off
The currency pair tested 141.61 levels amid Asian trading, which stood at 23.6% Fib retracement of the sell-off from session highs of 195.89 in June 2015 to 124.84 session lows in October 2016.
GBP/JPY changed hands at 141.50 levels, suggesting a higher position compared to the opening price of 137.13 in a weekly trading. In addition, a data is seen on the calendar that is anticipated to trigger a 400 point decline by today’s close.
Evidently, the gains could remain steady if the UK preliminary third quarter GDP beats forecasts, citing a weak figure could also trigger GBP bulls, though a 400 pip decline seemed to be a difficult task.
Current Stance of GBP/JPY
The chart below illustrates GBP/JPY price movement amid the central banks’ struggles in beating deflation, along with a stagnated growth having the policy reduction option.
Given a bullish tone of the pair, market participants still indulge in buying the currencies due to the widely anticipated GBP bulls, including decisions on the raising of interest rates.
Subsequently, the pair nearly touched resistance 141.686 in a light trading volume and is seen forming an upward trend in today’s close.
As the illustrative chart above shows a bullish movement of the pair, market participants are suggested to wait on the sidelines as there aren’t any supporting candle present as of today’s close.
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