Forex News

• GBP/JPY recovers early losses and rebounds to near 215.45 as the Japanese Yen underperforms.
• The BoE is expected to leave interest rates unchanged on April 30.
• Investors await the preliminary UK S&P Global PMI data for April.

The GBP/JPY pair claws back its early losses and turns marginally positive around 215.45 during the European trading session on Thursday. The pair bounces back as the Japanese Yen (JPY) underperforms its currency peers, except antipodeans, amid caution that the Bank of Japan (BoJ) could delay its plans of tightening the monetary policy further.

For meaningful cues on the BoJ’s monetary policy outlook, investors await the upcoming policy announcement on April 28, in which Japan’s central bank is expected to leave interest rates unchanged at 0.75%.

The uncertainty over BoJ’s rate hike plans is prompted by growing economic concerns due to rising oil prices in the wake of the Strait of Hormuz closure.

Meanwhile, the Pound Sterling (GBP) exhibits a mixed performance ahead of the preliminary United Kingdom (UK) S&P Global Purchasing Managers’ Index (PMI) data for April, which will be published at 08:30 GMT. The PMI report is expected to show that the overall private sector activity contracted due to a decline in the service sector activity growth and a slowdown in the manufacturing activity. The UK Composite PMI is seen at 49.8, lower than 50.3 in March.

On the monetary policy front, the Bank of England (BoE) is expected to leave interest rates unchanged at 3.75% in its policy meeting on April 30, as the UK core and service Consumer Price Index (CPI) growth has cooled down. The BoE is unlikely to slash interest rates as inflation expectations are still elevated due to higher energy prices.

ING analysts Warren Patterson and Ewa Manthey say Brent has broken back above $100/bbl as the oil market reprices expectations around the Iran conflict and disruptions in the Persian Gulf. They highlight fading hopes for a US–Iran resolution, growing demand destruction, tight jet fuel markets in Europe and record US exports of oil and refined products.

Brent climbs as disruption persists

"Hopes for a resolution between the US and Iran are fading as peace talks stall. In addition, Iran’s seizure of two vessels attempting to transit the Strait of Hormuz suggests disruptions to shipments are set to continue. The market is having to reprice expectations."

"This saw Brent break convincingly back above $100/bbl. As hopes fade, the reality of the supply disruption will set in, leaving further upside for prices."

"Meanwhile, we continue to see growing demand destruction in the oil market, a trend that will intensify as Persian Gulf supply disruptions persist. Airlines continue to announce flight cancellations amid a tightening in jet fuel supply and significant price strength. Europe’s jet fuel market is heavily exposed to developments in the Middle East."

"Meanwhile, Energy Information Administration data continue to show that the US is exporting record amounts of oil and refined products, as buyers around the globe seek alternative supplies."

"Although the US market has been relatively shielded from Middle East supply disruptions, prolonged instability tightens conditions as global buyers increasingly turn to US supplies."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

• US Dollar Index may test the immediate support at the nine-day EMA of 98.51.
• The 14-day Relative Strength Index at 46.72 sits below 50, signaling subdued momentum.
• The primary barrier lies at the 50-day EMA at 98.82.

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is remaining firm after two days of gains and trading around 98.60 during the early European hours on Thursday. The technical analysis of the daily chart shows that the dollar index is positioned slightly above the descending channel, suggesting a potential for a bullish reversal.

However, the near-term bias stays bearish as the US Dollar Index holds below the 50-day Exponential Moving Average (EMA), though trades only marginally above the short-term EMA, offering a fragile platform. Moreover, the 14-day Relative Strength Index (RSI) at 46.72 sits just below the neutral 50 line, hinting at subdued momentum after the recent pullback rather than a decisive recovery.

The immediate support lies at the nine-day EMA of 98.51, aligned with the upper boundary of the descending channel. A return to the channel would reinforce the bearish bias and put downward pressure on the US Dollar Index to test the lower boundary of the channel around 97.00. Further support appears at the 95.56, the lowest since February 2022, which was reached on January 27.

On the upside, the initial barrier lies at the 50-day EMA of 98.82. A sustained break above the medium-term average would support the DXY to explore the region around the 10-month high of 100.64, which was recorded on March 31.

(The technical analysis of this story was written with the help of an AI tool.)

• USD/JPY gains positive traction for the fourth straight day amid a combination of supporting factors.
• Mideast tensions, inflation fears, and less dovish Fed bets continue to underpin the safe-haven USD.
• Economic concerns due to energy supply disruptions and delayed BoJ rate hike bets weigh on the JPY.

The USD/JPY pair attracts some buyers for the fourth consecutive day and trades around the 159.65-159.70 area, or a one-and-a-half-week top during the early European session on Thursday. Spot prices, however, remain confined within a familiar range, held over the past month or so as traders seem reluctant to place aggressive directional bets amid a combination of diverging forces.

Despite a temporary extension of the US-Iran ceasefire, the lack of progress in peace talks and the standoff over the Strait of Hormuz continue to weigh on investors' sentiment. Moreover, the risk of a further escalation of tensions remains supportive of elevated Crude Oil prices, fueling inflationary concerns and tempering dovish US Federal Reserve (Fed) expectations. This, in turn, is seen underpinning the US Dollar's (USD) reserve currency status and acting as a tailwind for the USD/JPY pair.

The Japanese Yen (JPY), on the other hand, is weighed down by worries that Japan's economy will come under substantial strains due to continued disruptions to energy supplies from the Middle East. Adding to this, growing acceptance that the Bank of Japan (BoJ) will hold interest rates steady at its upcoming April policy meeting turns out to be another factor undermining the JPY and supporting the USD/JPY pair. The BoJ, however, is still expected to show readiness to raise borrowing costs as soon as June.

Furthermore, speculations that Japanese authorities will step in to stem further weakness in the domestic currency hold back the JPY bears from placing aggressive bets and keep a lid on any further appreciating move for the USD/JPY pair. Hence, it will be prudent to wait for a sustained move beyond the 160.00 psychological mark, also representing the top boundary of a short-term trading range hurdle, before positioning for the resumption of over a two-month-old uptrend from the February swing low.