• GBP/JPY edges lower on Friday, though the intraday downtick lacks bearish conviction.
• The recent UK political turmoil and dismal UK macro data continue to weigh on sterling.
• Rising bets for a full 100 bps BoE rate hike in November help limit any further downfall.

The GBP/JPY cross remains on the defensive through the early European session and refreshes daily low, around the 168.15-168.10 region in reaction to the dismal UK macro data.

In fact, the UK Office for National Statistics reported this Friday that Retail Sales declined by 1.4% in September, missing estimates pointing to a 0.5% fall. On an annualized basis, the UK Retail Sales plunged -6.9% during the reported month against the 5.0% slide expected. Moreover, the core Retail Sales tumbled 6.2% YoY in September versus -4.1% anticipated and -5.3% previous.

The data adds to concerns about the cost-of-living crisis in the United Kingdom amid growing worries about a deeper economic downturn. This comes on the back of the recent UK political turmoil, which undermines the British pound and exerts some downward pressure on the GBP/JPY cross. That said, bets for a full 100 bps rate hike by the Bank of England in November help limit the downside.

The Japanese yen, on the other hand, is prolonging its recent depreciating move amid a big divergence in the monetary policy stance adopted by the Bank of Japan and other major central banks. In fact, the BoJ, so far, has shown no inclination to hike interest rates and remains committed to continuing with its ultra-lose policy settings. This further seems to offer some support to the GBP/JPY cross.

It, however, remains to be seen if spot prices manage to regain any positive traction amid speculations that authorities might intervene again to stem any further weakness in the domestic currency. This, along with the cautious market mood, amid looming recession risks, could offer support to the safe-haven JPY and contribute to keeping a lid on any meaningful upside for the GBP/JPY cross.

Technical levels to watch