The sterling-yen cross retested the critical short-term support again, but bulls reappeared and pushed the price higher as the trend remained bullish.
UK April retail sales increased somewhat
In other economic news, the most recent CBI distributive trades survey showed a modest increase in retail sales in the UK in April. Retailers apparently remained skeptical even though it showed that sales volumes in the year to April increased, with the weighted balance improving to +5 from +1 in March.
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The sales balance increased to +21 from +12, indicating they were above average for the season. However, some respondents anticipated a decrease in sales volume for the following month, with a balance of -7.
According to Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, “an uptick in sales in April [was] perhaps enabled by the 10.1% increase in the value of benefits, including the state pension at the start of the month.”
But that improvement will be short-lived, as rising prices will lead to a drop in real value in the following months. Moreover, business surveys and the Insolvency Service’s statistics on redundancy announcements support the conclusion that job growth will slow to a halt during the next few months.
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Overall, Dickens predicted that the real disposable incomes of families would remain relatively steady in the second quarter before beginning to recover in the third quarter thanks to a decline in energy costs. As a result, they predict that retail sales will have increased by only 1% over the previous year by year’s end.
BoJ to remain as dovish as possible
It should be taken into account that former BoJ Deputy Governor Masazumi Wakatabe has expressed disbelief at the possibility of a change in Yield Curve Control (YCC) this coming Friday.
Furthermore, the danger of inflation driven by a loss of market faith in Japan’s finances is minimal for the time being, according to comments made by Bank of Japan (BoJ) Governor Kazuo Ueda in a previous speech to the Japanese Parliament, known as the Diet. The official downplayed concerns about inflation and implied that nothing would change at this week’s monetary policy meeting, not even with regard to the YCC.
US data moving markets later today
Later today, GDP statistics for the first quarter will be released, and investors will look to it for further indications of a possible downturn in the world’s largest economy. It is believed that the reading would reflect a slowing of growth from the previous quarter while still being in the expansion zone.
The favored inflation indicator of the Federal Reserve, the personal consumption expenditures index, is also in the spotlight since it is forecast to reveal that inflation remained stubbornly high in March, well beyond the 2% objective set by the Fed.
As previously mentioned, the price has remained above the major support line, near 166. Thus, the short-term outlook appears bullish, targeting the current cycle highs near 168.
GBP/JPY daily chart, source: author´s analysis, tradingview.com