The pound remained range-bound against the yen on Friday following the release of solid economic data from both the UK and Japan. While Japan’s preliminary industrial production and retail sales data exceeded economists’ expectations, the UK’s current account deficit, GDP, and mortgage approvals data surpassed the market’s forecasts. Overall, the GBP/JPY pair rallied from a low of 159.80 to a high of 162.17 in the last 24 hours.
According to Japan’s Statistics Bureau, the country’s jobless rate inched lower to 2.50% in August, from 2.60% in the prior month. The reported figure was in line with economists’ estimates and marked the lowest reading since February 2020.
The count of jobless individuals fell by 0.60% m-o-m to 1.75 million in August 2022. Employment decreased 0.10% to 67.30 million. Also, the labor force participation rate fell by 0.10% to 69.05 million in August. In the meantime, the jobs-to-applications ratio stood at 1.32 in August, up from 1.29 in July.
According to the Ministry of Economy, Trade, and Industry (METI), Japan’s industrial production rose by 2.70% m-o-m in August, following a 0.80% increase in the prior month, and easily surpassed the market’s forecasts of 0.20% growth. The reported figure reflects the third successive monthly increase.
Correspondingly, the production index increased to 99.50 in August. Likewise, the shipments and inventories index grew to 96.60 and 101.60, respectively. On the contrary, the inventory ratio fell by 1.80% m-o-m in August. Correspondingly, the inventory ratio index stood at 120.20.
Production machinery grew by 6.10% in August, following a 6% rise in July. Iron, steel, and non-ferrous metals posted a growth of 3.60% in August, following a decline of 1.60% in the prior month. Chemicals recorded an increase of 2.70%, compared with a decline of 4.80%.
On a year-on-year basis, industrial output increased 5.10% in August, rebounding from a 2% decline in July. The reported figure reflects the first increase in six months.
According to the Ministry of Economy, Trade, and Industry (METI), Japan’s retail sales rose by 4.10% y-o-y in August, following a 2.40% increase in the prior month, and greater than the 2.80% growth anticipated by economists.
The reported figure reflects the sixth consecutive monthly increase in retail trade and the sharpest rate of growth since May 2021, against the backdrop of improving consumption amidst the pandemic.
General merchandise grew by 10.10% y-o-y in August, following a 4.60% rise in July. Fuel rose by 10.80%, compared with 7.90%. Medicine and toiletries surged 13.60% in August, following an increase of 8.50%.
Fabric, apparel, and accessories posted an increase of 6.20%, following a rise of 1.10%. In the meantime, sales of food & beverages remained unaltered after rising 0.5% in July. Furthermore, motor vehicle sales dropped 6.30%, following a decrease of 2.3%.
On a m-o-m basis, retail trade grew by 1.40% in August, the highest in five months and quicker than 0.70% in July.
The Cabinet Office of Japan stated that the country’s consumer confidence inched lower to 30.80 in September, from 32.50 in July, and disappointed economists who were expecting an improvement in the consumer confidence index to 33.60.
All sub-indexes recorded a decline. Employment perceptions declined 1.70 (m-o-m) points to 35.40 in August. The overall likelihood fell by 2.10 points to 29. Also, the opinion about income growth decreased by 0.60 points to 35.40. Even the inclination to purchase durable goods decreased by 2.50 points to 23.50.
According to Japan’s Ministry of Land, Infrastructure, Transport, and Tourism, the country’s housing starts grew by 4.60% y-o-y in August, following a 5.40% decline in July. Economists anticipated a decline of 4% in the reported period.
The reported figure reflects the first growth since April as fresh construction starts rebounded by 78.70% in August, compared with a decline of 26.40% in July. Also, dwelling starts for rent surged 8.90% in August, following a 1.50% increase in the prior month. During the same period, new construction fell by 11.20%, following 14.10% in the earlier month.
The UK current account deficit narrowed to £33.80 billion in the June 2022 quarter, from £43.90 billion in the first quarter, and pleased economists who were expecting only a small decline in the current account deficit to £43.20 billion. The reported figure reflects 5.50% of the UK’s GDP in 2Q 2022.
The overall trade deficit narrowed slightly to £26.20 billion in 2Q 2022, from £32.20 billion in 1Q 2022. The surging fuel import costs kept the goods deficit at high levels of £62.30 billion in the June quarter, compared with £67.80 billion in the March 2022 quarter.
The services surplus rose to £36.10 billion, from £35.60 billion. The aggregate primary income deficit narrowed considerably to £1.90 billion, from £6.10 billion. The decline was aided by a surge in the repatriation of robust overseas profits in the energy sector. The secondary income deficit remained unaltered at £5.60 billion.
According to the final data published by the UK Office for National Statistics, the country’s GDP grew by 0.2% q-o-q in the June 2022 quarter, following a 0.70% growth in the March 2022 quarter. The preliminary estimates had indicated that the UK’s economy contracted by 0.10% in the second quarter. Economists did not anticipate any change in the initial estimates.
Services output is assessed to have grown by 0.20% in the June 2022 quarter, a positive change from initial estimates forecasting a 0.40% decline.
The level of real GDP currently stands at 0.20% below its 4Q 2019 level (the last quarter before the outbreak of the pandemic). The preliminary estimates had pegged the UK’s GDP at 0.60% above its 4Q 2019 level.
Production shrank 0.20%. In particular, manufacturing declined by 1.10% while mining fell by 1%. Household consumption inched 0.1% higher and investments fell by 1.40%.
According to the data published by the Bank of England, the UK’s mortgage approvals increased to 74,000 in August, from 64,000 in the prior month, and comforted the market, which was expecting a slight drop in mortgage approvals to 63,000. The reported figure reflects the highest level since January 2022.
The solid economic data from both countries are expected to keep the GBP/JPY pair range-bound in the short term.
The historical price chart indicates that the GBP/JPY pair is rising after testing the support at 152.35. The next resistance is anticipated only near 166.05. Additionally, the currency pair is trading above its 50-day moving average while the MACD indicator is showing a negative 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.
