Mon. May 20th, 2024

GBP/JPY FLOATS HIGHER ON UPBEAT MARKET MOOD AFTER PREVIOUS DAY’S STEEP DESCENT30 April 2024

GBP/JPY trades over a third of a percentage point higher at just above 197 on Tuesday.

  • GBP/JPY rises steadily as market mood brightens, reducing flows to the safe-haven Yen. 
  • Positive lending data in the UK shows credit remains ample. 
  • BRC Shop Price Index shows disinflation in the UK but not enough to prompt BoE into action, say BBH analysts.

forces at work in April. This might have been expected to weaken GBP, given lower inflation is more likely to bring forward the time when the BoE could decide to cut interest rates. 

“Shop Price annual inflation eased to 0.8% in April, down from 1.3% in March. This is below the three-month average rate of 1.4%…its lowest since December 2021,” said the BRC report. 

Additionally, non-food items entered deflationary territory, falling 0.6% in April compared to a 0.2% rise in March and a higher 0.2% three-month average. 

Food inflation in the UK decelerated to 3.4% in April, down from 3.7% in March. This was below the three-month average rate of 3.9%. It was the twelfth consecutive deceleration in the food category, according to the report. 

Although the BRC data painted a deflationary picture, analysts were quick to dismiss any impact on BoE decision-making from the report. 

“While the data is welcome, shop price disinflation is unlikely to convince the BoE to move early with policy rate cuts, as it is more concerned with high and sticky services inflation. The first cut is still seen in August,” remarked analysts at Brown Brothers Harriman.

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