The Bank of England brought forward projections for a 2023 recession to 2022 this year for the UK at its last meeting. Inflation was also expected to rise above 13% for the UK in October as the new energy price cap bites. So, with a slowing economy, the GBP has been losing value over the last few weeks. However, it has kept relatively strong against the JPY. Why? It’s just because the JPY has been very weak too on the rising rate differentials between Japan and the US.
So what’s the trade? Well, if the Bank of Japan acts against the weakness in the JPY the JPY could rapidly strengthen against the GBP. That would favour GBPJPY selling. Also, look at the strong seasonals that are ahead favouring GBPJPY selling around the middle of September.
Major Trade Risks: The major risk here is monetary policy does not complement the seasonal pattern. Remember, previous patterns are not a guarantee of future patterns.
HYCM clients can access the Seasonax product in order to analyse over 25,000 currency pairs, indices, commodities, as well as individual stocks. Please contact your account manager for a free trial. Certain products & services mentioned herein may or may not be available to all clients depending on which HYCM Capital Markets Group entity their trading account(s) adheres to.