Pound in Peril: Can the British Currency Stem its Slide Amid UK Economic Recovery Hopes

British Pound Weekly Outlook: Will it Hold Back its Decline?

Hopes for a Recovery in the UK Economy are High

The pound/yen has been weak this week, with risk aversion leading to active selling of the pound and buying of the yen. This trend was driven by the fall in Japanese and US stocks, which put off investors. Although the Bank of England is cautious about further interest rate cuts at an early stage, expectations of further interest rate hikes by the Bank of Japan within the year have not receded. As a result, selling of the pound and buying of the yen was observed in anticipation of a gradual narrowing of the interest rate gap between Japan and the UK.

Expectations for a Recovery in the UK Economy

Will the pound/yen be reluctant to fall next week? The Bank of Japan is likely to decide to keep the policy interest rate unchanged at its monetary policy meeting on the 19th and 20th of this month. However, Governor Ueda is positive about monetary normalization, which may lead to the yen being bought. Meanwhile, the UK’s economic indicators have improved slightly, and there is a possibility that the pound selling and yen buying will take a breather on expectations of an economic recovery.

Key UK Economic Indicators and Events

July industrial production (June: +0.8% compared to previous month) – scheduled for release on the 11th
July merchandise trade balance (June: -18.894 billion pounds) – scheduled for release on the 11th

Expected Trading Range: 185.00 yen – 189.00 yen

Source: Fisco