GBP/JPY stays on the back foot around 134.80 after BOJ, eyes on UK Retail Sales, BOE for now

• GBP/JPY shows little reaction to the Bank of Japan’s (BOJ) monetary policy decision.
• The BOJ left monetary policy unchanged, stays ready to ease policy further.
• Brexit/trade headlines, UK Retail Sales and BOE could offer further direction.

Given the BOJ’s refrain from altering current monetary policy, GBP/JPY remains weak while taking rounds to 134.80 during early Thursday.

The BOJ holds the monetary policy unchanged with policy rate at -0.1% and 10-year Japanese Government Bond (JGB) yield target around 0%. The Japanese central bank maintains a pledge to ease policy without hesitation if there is risk economy could lose momentum to hit price goal while also conveying moderate economic expansion.

Although Japan’s expectations of getting a clear no for future auto levies from the US before signing the trade deal portray challenges to the safe-haven currency, recent fears surrounding the Saudi Arabia-Iran tension and overall optimism surrounding the US-Japan deal helps the Japanese Yen (JPY) off-late.

The British Pound (GBP) has also been on the back foot despite likely receding challenges to the Irish border issue due to the Democratic Unionist Party (DUP) leader Arlene Foster’s shift in support. The reason may be the European Union’s (EU) two-week ultimatum to the UK for presenting any proposal for Northern Ireland for getting a deal.

Investors will now be on the lookout for any change in the Bank of England’s (BOE) tone, as the British central bank isn’t expected to alter present monetary policy, while also observing weakness in the headline UK Retail Sales data for August month.

Technical Analysis

A sustained downside break below 100-day simple moving average (DMA) level of 135.00 opens the door for extended declines to July 18 low near 133.85 while a rise beyond 135.20 can recall 136.30 and July month top surrounding 137.80.