GBP/JPY – UK Inflation Expected To Break New High

#OPINIONLEADER# #GBP/JPY#

 NOV 17, 2021

• UK employment strengthened despite ending of furlough
• UK inflation may warrant a rate hike
• Potential upside on GBP/JPY

Chart 1: GBP/JPY H4 chart

The UK Office for National Statistics (ONS) released a surprisingly strong jobs report yesterday despite the end of the government’s furlough scheme. In the latest 3-month period, 247,000 jobs were added while in October alone, the ONS reported adding 160,000 jobs into the economy. Hence the ending of the government furlough scheme has little negative impact on the UK job market to the surprise of many.

The ONS will be releasing another crucial economic data later today. Annual inflation is expected to hit 3.9% in October, a strong rise from the previous month of 3.1%. From the recent monetary policy meeting, the Bank of England (BoE) highlighted that it may be necessary to increase interest rate over the coming months in order to tame the rising inflation down sustainably to the central bank’s 2% target.

With the positive jobs data and a potential strong rise in inflation, the BoE may be hiking interest rate during their next meeting. Hence, if the inflation data to be released later is at least as strong as forecasted (or not deviating to far below forecast), the British pound may be set for a rally.

Trade Setup for GBP/JPY (H4)

Buy Stop at 154.60

Upcoming news that may impact price movement of GBP/JPY

16 November – UK employment data release at 1500 (GMT+8)

17 November – UK CPI y/y data release at 1500 (GMT+8)

19 November – UK Retail Sales m/m data release at 1500 (GMT+8)

19 November – Bank of England committee member Pill speaking at 2000 (GMT+8)

23 November – UK Flash PMI data release at 1530 (GMT+8)