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Forex Market: GBP/JPY extends gains as the UK economy expands in line with estimates

The British pound rose for a second day against the Japanese yen on Friday, after official data showed the UK economy grew for a fourth consecutive quarter in the final three months of 2013, in line with analysts estimates.

GBP/JPY hit a session high at 170.06 at 10:02 GMT, after which consolidation followed at 170.02, adding 0.17% for the day. Support was likely to be received at March 27th low, 168.65, while resistance was to be met at March 27th high, 170.33, also the pairs highest since March 13.

The UK economy grew at an annualized rate of 2.7% in the final three months of 2013, in line with analysts estimates and unchanged from initial estimates, data by the UK Office for National Statistics showed today. This is the fourth consecutive month in which the UK economy expands.

“Citi economists expect growth close to 3.5 percent this year. This could see the Bank of England tighten policy sooner perhaps as early as the fourth quarter,” said Josh O’Byrne, a foreign-exchange strategist at Citigroup Inc. in London, cited by Bloomberg.

The Bank of England has maintained its benchmark interest rate at a record-low 0.5 percent for five years now. The one-month forward contracts for the British pound overnight average indicate the main interest rate will be raised by 0.25% by March next year and will reach 1% by September.

Meanwhile, a number of upbeat reports heightened demand for the Japanese yen earlier in the trading day.

A government report showed today that the Japanese jobless rate declined to 3.6% last month, the lowest in more than six years, from 3.7% in January. The jobs-to-applicants ratio also increased to 1.05 last month from 1.04 in January, in line with analysts’ estimates and matching the highest since August 2007. This indicates that there were 105 job offers for every 100 job seekers.

The number of unemployed people declined in February for the 45th consecutive month, dropping by 450 000 from a year ago to 2.32 million people, data from the report revealed. All these data points, added to signs of a robust labor market, which in turn will lead to higher consumer spending.

A separate report showed that Japanese retail sales rose at an annualized rate of 3.6% last month, exceeding expectations for a 3.2% gain and following a 4.4% advance in January.

Moreover, consumer price inflation in Tokyo surged 1.3% in March from a year ago, beating projections for a 1.2% rise and following 1.1% gain in the prior month.

Core consumer price inflation, which excludes fresh food, also advanced by 1% this month from the previous year, more than the 0.9% increase predicted by analysts and after a 0.9% gain in the previous month.

Elsewhere, EUR/JPY touched a session low at 139.97 at 08:16 GMT, after which the pair consolidated at 140.15, losing 0.2% for the day. Support was likely to be received at March 4th low, 139.31, while resistance was to be met at March 27th high, 141.04. is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover Forex, Price Action and Social Trading.

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