The pound surged against the yen yesterday following the release of overwhelmingly positive UK flash services PMI data for February. Notably, Japan’s flash manufacturing PMI data for February also missed estimates. This stoked up the selloff of the yen. Overall, the GBP/JPY pair rallied from a low of 161.40 to a high of 162.90 in the past 24 hours.
The S&P Global Japan flash manufacturing PMI (purchasing managers’ index) inched lower to 47.40 in February from 48.90 in January, which disappointed economists’ who were expecting an improvement in the flash manufacturing PMI to 49.30. A reading below 50 indicates contraction and vice versa. The reported reading signals the steepest contraction in two-and-a-half years and a continued decline in the health industry.
Also, Japan’s manufacturing output index fell to 44.90 in February from 47.20 in January.
However, the country’s flash services business activity index increased to 53.60 in February from 52.30 in January. Notably, service activity has grown consecutively for six months, with the recent rise reflecting the steepest growth since June 2022. Fresh order growth has also recorded an increase. Also, new orders from overseas rose slightly. Despite these positive developments, employment declined slightly for the second consecutive month.
The UK’s public sector net borrowing, devoid of public sector banks, was in surplus by £5.4 billion in January and £5.0 billion higher than the forecast made by the Office of Budget Responsibility. However, the reported figure was £7.1 billion less than for a similar period last year.
Income tax (self-assessed) receipts were £21.9 billion, reflecting the highest amount since the organization started documenting monthly records in April 1999. High tax receipts were partly negated by considerable spending on energy support programs and a one-time payment associated with past customs duties owed to the European Union. Furthermore, debt interest payable was £6.7 billion, representing the highest January figure in 26 years.
The S&P Global UK flash manufacturing purchasing managers’ index (PMI) improved to a seven-month high of 49.20 in February from 47 in January and surpassed forecasts of 47.50. A reading below 50 indicates contraction and vice versa.
Also, the UK manufacturing PMI rose to a nine-month high of 51.60 in February from 47 in January.
Furthermore, the S&P Global UK flash services PMI rebounded into expansion territory with a reading of 53.30, reflecting an eight-month high, following a reading of 48.70 in January. Economists had anticipated a reading of only 49.20.
Overall, the UK flash PMI composite output index rose to an eight-month high of 53 in February from 48.50 in January. The reported figure reflects the first reading above 50 since July 2022. Additionally, the reading indicated the steepest rate of expansion in the private sector in eight months.
The UK private sector companies recorded an impressive rebound in business activities in February, ending a six-month period of declining output. Both the manufacturing and service sectors recorded growth, with the latter reporting a quicker rate of expansion. Also, production volumes in the manufacturing industry rose for the first time since June 2022, even though the rate of growth was minimal.
The aggregate volumes of fresh work received by the UK private sector businesses grew for the first time in seven months and at a robust rate since May 2022.
Robust client demand paved the way for a renewed rise in order backlogs and employment across private-sector enterprises in February. Notably, the pace of employment was the steepest since October 2022, primarily led by further hiring in the service-oriented industry.
Eventually, reflecting the positive trends for output and fresh orders, the latest survey info reflected a robust rebound in growth forecasts for the year ahead. The level of optimism about business activity over the forthcoming 12 months stood at its highest level since March 2022.
The upbeat UK manufacturing and services PMI data is expected to keep the GBP/JPY pair slightly bullish in the short term.
The historical price chart indicates that the GBP/JPY pair is rising after testing the support at 161.40. The next resistance is anticipated only near 166.95. Additionally, the currency pair is trading above its 50-day moving average, while the MACD indicator is showing a positive reading. Therefore, we anticipate the GBP/JPY pair to remain in an uptrend in the days ahead.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
