GBP/JPY at 8-week’s low trading near 148.00 handle

• The GBP is mainly supported by expectations of higher wage’s growth and the unemployment rate which is at 40 years low. 
• The GBP/JPY is having a consolidation day as market participants are weighing the Bank of England’s May Inflation Report from Super Thursday.

The GBP/JPY is trading at around 148.00 up 0.09% on Friday.

The GBP/JPY made a low at 147.60 in the early European session after which bulls lifted the pair to the 148.50 level in the US session. From the resistance the bears took the lead and the Guppy is now consolidating just above the 148.00 handle. 

Investors are weighing the impact of the dovish Bank of England's coments on Thursday as well as adjusting their positions as the week is coming to an end. Despite the 180-pip sell-off on BoE Super Thursday, the Guppy is consolidating inside Thursday's range. The GBP is mainly supported by expectations of higher wage’s growth and the unemployment rate which is at 40 years low. 

According to analysts at ING, the market might have over-reacted as its as totally ruled out a rate hike in 2018. The BoE says that the weaker growth is only going to be temporary and an upward revision for the first quarter GDP is forecast at 0.3% versus 0.1% seen previously. The BoE expects higher wage’s growth and says that “ongoing tightening would be appropriate”

However, the dovish part of the May Inflation Report said: "The MPC judges that the impact of the past depreciation of sterling on CPI inflation while remaining significant, is likely to fade a little faster than previously thought. Taking external and domestic influences together, CPI inflation is projected to fall back slightly more quickly than in February, reaching the target in two years." Also adding: “the inflation rates of the most import-intensive components of the CPI appear to have peaked."

Risks are seen in the consumer sector. “By some measures, the first quarter was the worst three-month period for retailers since the crisis,” says James Smith from ING. “We suspect that this will have been a key reason why policymakers opted to keep rates unchanged today,” the analyst added. It is also worth mentioning that the unertainties related to the Brexit weigh on GBP.

GBP/JPY 4-hour chart 

The medium-term trend is bearish and the market is trading below the 50, 100 and 200-period simple moving averages (4-hour chart) suggesting a strong downward momentum. Support is seen at the 148.00 figure and the 147.50 level, Thursday low, followed by the 147.00 swing low and figure. To the upside, resistance is seen at 148.50, high of the day and at the 149.30, Thursday’s high.