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On May 2, German Reconstruction Bank economist Schoenwald said in a report that the European Central Bank should be free to cut interest rates again after data showed that the euro zone inflation rate remained at 2.2% in April. She said that the stronger euro made imported goods cheaper, coupled with the suppression of the economy by trade conflicts, should be enough to stabilize consumer inflation around the 2% target in the medium term. This leaves room for the ECB to cut interest rates again in June. However, price pressures in the euro zone service industry remained high, pushing up the core inflation rate.According to Japans Kyodo News: The United States is not considering exempting Japan from its 10% reciprocal tariff.On May 2, analysts at Monex Europe said in a report that the progress made by the right-wing party Reform UK in the UK local elections may be one of the reasons for the current decline of the pound against the euro. "While the local election results will not have a huge impact on the market in our view, it still made headlines in the UK, and the reform seemed to have had a very good night at the expense of both the Labour Party and the Conservative Party." However, they said that the US non-farm payroll report will eventually have a greater impact on the trend of the pound.ExxonMobil (XOM.N): Continues to focus on cutting business costs.Israeli military: It has been confirmed that a missile was fired from Yemen towards Israeli territory and the air defense system was activated to intercept the threat.

GBP/JPY falls below 161.50 as the rally pauses in the face of inflation concerns and remarks from BoE Governor Bailey

Alina Haynes

Mar 28, 2023 15:34

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GBP/JPY halted and attained a weekly high of 161.80 after a rapid ascent. Due to Monday's optimistic risk sentiment and rising global bond yields, the currency pair rose.

 

In a recent speech, Governor Bailey of the Bank of England (BoE) emphasized the need to remain vigilant for signs of persistent inflationary pressures. If these pressures manifest, he suggested, additional monetary tightening may be necessary. Although there are indications of economic resiliency, Bailey warned that the inflation trajectory may not be completely smooth. An important objective of monetary policy is to prevent persistent inflation resulting from external factors. Additionally, Bailey identified significant strains in portions of the global banking system, which could have implications for the global economy as a whole.

 

Bailey stated that the full impact of recent bank rate hikes has not yet been felt, and that inactivity due to early retirement may have contributed to an increase in cyclical rates. Due to these factors, the Bank of England has significantly raised interest rates. Bailey cautioned that inflation could be more persistent than anticipated, so it is crucial to remain vigilant for signs of inflationary pressure. If such pressures manifest, it may be necessary to tighten monetary policy further to contain inflation.

 

Overall, Bailey's speech emphasizes the Bank of England's commitment to economic growth and price stability. The Bank of England is assiduously managing risks to maintain inflation within its target range.

 

Due to the absence of a press conference at the March meeting of the Board of Governors, these remarks are notable. The majority of analysts predict that the BoE will suspend in May, while others anticipate that additional tightening will be necessary as inflation control remains the central bank's top priority over banking uncertainty.

 

The British Retail Consortium (BRC) reported that store price inflation rose to 8.9% in March, up from 8.2% in February, highlighting the inflationary pressure. Alternatively, Japan's Minister of Economy Goto announced plans to invest JPY 2,200,000,000,000 in a stimulus program.


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