The pound remained range-bound against the yen yesterday following the release of weak economic data from both the UK and Japan. While Japan’s flash manufacturing PMI for October missed estimates, the UK’s Claimant Count Change data for September was higher than anticipated. Overall, the GBP/JPY pair traded in a range of between 183.07 and 183.75 in the past 24 hours.
The au Jibun Bank Japan flash Manufacturing Purchasing Managers’ Index (PMI) was 48.50 in October, unchanged from the previous month and missing forecasts of 48.90. The reported figure reflects the fifth successive decline in the operating environment. A reading below 50 indicates contraction, and vice versa.
A continued decline in fresh orders paved the way for a contraction in production at the quickest pace in eight months. As a consequence, purchasing activity fell, while a reduction in capacity pressures resulted in employment levels declining for the first time since February 2021.
Also, the flash manufacturing output index decreased to 47.60 in October from 48.70 in September.
Furthermore, the au Jibun Bank Flash Japan Services Business Activity Index fell to 51.10 in October from 53.80 in September. The reported reading reflects the 14th successive month of expansion in business activity, but the growth rate was the slowest so far this year.
Fresh business grew at a weaker pace in October, while overseas demand for Japan’s services fell for the first time in 14 months. The sentiment with respect to future activity and indicators of staff scarcity, however, paved the way for a robust rise in employment.
Overall, the flash composite output index fell to contraction territory for the first time since December 2022, at 49.90 in October from 52.10 in September.
The UK Office for National Statistics stated that the country’s Claimant Count Change, representing the change in the number of people claiming unemployment-related benefits, rose by 20,400 in September following a decline of 9,000 in the previous month and higher than forecasts of 2,300.
The number of employees on the payroll fell by 11,000 in September to 30.10 million. The UK’s employment inched down by 0.30% to 75.70% between June and August, compared with the earlier three months (March–May 2023). Additionally, the estimated number of vacancies declined by 43,000 to 988,000 in the July–September period.
The UK’s unemployment rate fell to 4.20% in August from 4.30% in the previous month. Economists did not anticipate any change in the unemployment rate.
The S&P Global/CIPS United Kingdom flash PMI (purchasing managers’ index) improved to a three-month high of 45.20 in October from 44.30 in September and surpassed forecasts of 44.70.
Also, the UK flash manufacturing output index hit a three-month high of 45.30 in October from 44.60 in September.
The UK flash services PMI business activity index inched down to a nine-month low of 49.20 in October from 49.30 in September and missed forecasts of 49.40. Service providers have reported a slight decrease in business activity for the month of October, with this reduction being the most significant observed since the beginning of the year in January.
Overall, the UK flash PMI composite output index hit a two-month high of 48.60 in October from 48.50 in September.
Recent data underlined a continued modest decrease in fresh business activity within the private sector economy. Over the past four months, a consistent trend of declining fresh order volumes has been observed, with the latest decrease reflecting a slightly accelerated pace compared to the previous (September) month. Furthermore, a notable decrease in backlogs of work implies limited pressure on business capacity in the month of October.
As a result, the trimmed demand resulted in a decrease in staff recruitment, reflecting a second consecutive month of declining private-sector employment. Notably, the latest survey indicates a decrease in business optimism, marking the first instance of such a dip since July and representing the lowest level recorded in the year-to-date.
The weak economic data from both countries is expected to keep the GBP/JPY pair range-bound in the short term.
The historical price chart indicates that the GBP/JPY pair is gaining ground after testing the support at 181.30. The next resistance is anticipated to be only near 185.75. Additionally, the currency pair is trading above its 50-day moving average, while the RSI indicator is showing a reading above 50. Therefore, we anticipate that the uptrend will continue 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.
