The JPY weakness has been notable this week. Some are even talking about the carry trade on the JPY coming back. Japan’s PM Kishida is also in favour of a weaker JPY to boost exports. Remember, weak yen = cheaper exports. The Bank of England and the Bank of Japan divergence looks set to continue froth both Governor Bailey and hawkish Saunders expressing inflationary concerns. A rate hike in November or December can’t be ruled out now from the BoE. No interest rate hikes are expected for the next year from the JPY. Therefore, GBPJPY buyers should be favoured by this central bank divergence. Any pullbacks look very attractive, especially when considering the strong seasonal pattern.

Over the last 10 years, the GBPJPY has risen 90% of the time between October 13 and November 30 with an average return of +3.97%. The largest gain was in 2016 with a 12.65% rise. The largest loss was in 2018 where it registered a -1.53% loss.

Major Trade Risks:

  • Any slow down in the UK economic recovery/ bad Covid news for the UK will invalidate this outlook.
  • Any negative developments around the N.Ireland protocol will invalidate this outlook.