The pound gained ground against the yen on the first trading day of the week after the Confederation of British Industry’s retail sales data for February surpassed estimates. The pound’s uptrend was also fueled by better-than-anticipated Japan’s Services Producer Price Index (SPPI) data for January. There were no other major economic releases yesterday. Overall, the GBP/JPY pair rallied from a low of 190.33 to a high of 191.32 in the past 24 hours.
According to the data published by the Bank of Japan, the country’s Services Producer Price Index (SPPI) rose by 2.10% y-o-y in January following an increase of 2.40% in the previous month but missed forecasts of 2.40% growth.
The information and communication sector recorded a 2.20%y-o-y in SPPI in January. Transportation and postal activities rose by 2.50%. Likewise, leasing and rental increased by 2.50%. Real estate services grew by 1.40%. Finance and insurance inched up 0.60%. Other services increased by 2.40%.
Notably, other services, which comprise hotels, civil engineering and architectural services, and worker dispatching services, contributed to 0.84% of the January (y-o-y) SPPI increase. While the information and communication sector contributed 0.48% to annual SPPI growth, transportation and postal activities contributed 0.39%.
Excluding international transportation, the SPPI grew by 2.10% y-o-y in January, following a 2.30% increase in the previous month.
On an m-o-m basis, the SPPI fell by 0.50% in January after inching up 0.10% in December.
According to the data published by the Confederation of British Industry, the UK’s retail sales declined at a slower pace of -7% in the year ending February, following a 50% dip in the previous month and bettering economists’ estimates of a -33% decrease. The pace of decline in February was the slowest compared to the earlier ten months of contraction. Retailers anticipate a 15% decline in sales in the year ending March.
In February, sales were considered to be average for the season, showing a modest decline of 1% compared to the significant drop of 47% in January. This comes after four consecutive months of sales being below the seasonal norms. Looking ahead, retailers anticipate that sales will remain below the seasonal averages next month, with an expected decrease of 9%.
Internet retail sales grew by 4% in the year ending February, reflecting the first increase in eight months, after declining by 54% in January. Businesses expect internet sales to record a growth of 37% in March.
Selling price inflation eased to 54% in the year to February, reflecting the lowest level since mid-2021, from 73% in November. Still, it remained above its long-term average of 42%. In March, firms expect selling price inflation to match February’s reading (+54%).
Employment declined by 19% in the year ending February, reflecting the sixth successive decline, after decreasing by 11% in November. A decline of 20% is expected in March.
Retailers expect a 9% decrease in capital spending for the upcoming year. However, the investment outlook is relatively less negative compared to the past two years, marking a somewhat more optimistic trend.
The better-than-anticipated UK retail sales data is expected to keep the GBP/JPY pair slightly bullish in the short term.
Technically, the GBP/JPY is ascending after testing support at 190.25. The next resistance is anticipated to be near 196.70. Additionally, the currency pair is trading above its 50-day moving average, while the stochastic indicator is in the bullish zone. Therefore, we anticipate the currency pair to remain in an uptrend in the near term.
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.
