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

The British pound has experienced a weak trend this week, with selling intensifying due to falling Japanese and US stock prices. Risk aversion has led to active selling of the pound and buying of the yen, as investors are cautious about the market’s future.

Despite the Bank of England’s cautious approach to further interest rate cuts, expectations of interest rate hikes by the Bank of Japan within the year have not receded. This has resulted in selling of the pound and buying of the yen, as investors anticipate a gradual narrowing of the interest rate gap between Japan and the UK. The trading range for the pound/yen has been between 186.52 yen and 193.48 yen.

Expectations for a Recovery in the UK Economy

However, there is a possibility that the pound/yen may 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. Meanwhile, the UK’s economic indicators have shown slight improvements, which may lead to a breather in pound selling and yen buying on expectations of an economic recovery.

Upcoming 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

The expected trading range for the pound/yen is between 185.00 yen and 189.00 yen.