GBP/JPY limited in a range while the BOE adopts a moderate tone, the BOJ remains cautious to inflation

• The GBP/JPY is slightly down near 197.30 in the midst of the lack of data from the United Kingdom.
• The governor of the BOE, Bailey, points out a “gradually downward” type; It highlights the weakening of the labor market.
• Ueda del Boj says that underlying inflation is maintained below 2%, despite the high general indices.

The pound sterling (GBP) weakens slightly in front of the Japanese Yen (JPY) on Tuesday, with the GBP/JPY torque around 197.30 during the American session. In the absence of macroeconomic publications of the United Kingdom, the pound is drifted, largely guided by the comments of the central banks and the broader feeling of the market. Meanwhile, the Japanese Yen finds a modest support of a Optimistic Tankan business survey and a stable consumer confidence index, although the profits are limited by a weaker Jibun Bank manufacturing PMI, which underlines the persistent weakness in the industrial sector of Japan.

Speaking in the ECB forum in Sintra, Portugal, the governor of the Bank of England (BOE), Andrew Bailey, adopted a more moderate tone, suggesting that the path of interest rates is now “gradually down.” Bailey recognized the first signs of weakening of the labor market and emphasized that current uncertainty lies more in economic activity than in inflation. He pointed out that companies are delaying investment in the midst of persistent economic ambiguity, while stressing the need for structural reforms to boost the productivity of the United Kingdom. Regarding the implementation of policies, Bailey indicated that the quantitative hardening rhythm (QT) and the potential increase in the slope of the performance curve remain active considerations, reinforcing the cautious and gradual approach of the BOE.

The governor of the Bank of Japan (BOJ), Kazuo Ueda, also speaking in the Sintra forum, maintained a measure measured on inflation. Although the general inflation in Japan has remained above the 2% target of the BOJ for more than three years – a large extent due to food prices – it indicated that the underlying inflation is maintained “something below” the target. He explained that the dynamics of inflation in Japan is molded by three forces: a strong domestic demand and salaries, cyclic pressures such as US tariffs, and supply shocks, particularly those related to food costs.

Earlier in the day, Japan’s economic data pointed to a slow but constant recovery. The purchasing managers index (PMI) Jibun Bank manufacturing rose to 50.1 in June, indicating the first expansion in 13 months, backed by a stronger manufacturing production and a continuous job creation. However, the underlying demand remained fragile, with both new internal orders and export sales decreasing again in June, partly pressed by the new commercial tariffs imposed by the US, separately, the Tankan survey of the BOJ showed an improved feeling among the great manufacturers, with the index rising to 13 in the second quarter, from 12 previously and well above the expectations of 10.