• GBP/JPY has offered strongly as UK Retail Sales have landed significantly lower than the forecasts.
• The verbal intervention from Japanese officials has brought a short-lived strength to yen.
• BOE Governor Andrew Bailey warned about the risks of higher inflation ahead.

The GBP/JPY pair has dropped below 166.50 sharply as the UK National Statistics has reported the yearly Retail Sales at 0.9%. The numbers have arrived much lower than the expectation of 2.8% and the prior print of 7.2%. Along with this, the monthly Retail Sales figure has dropped to -1.4%% against the preliminary reading of -0.3%.

The cross has been declining since Thursday after failing to reclaim its multi-year high of 168.43 printed on Wednesday. It looks like a verbal intervention by the officials from the Bank of Japan (BOJ) has infused fresh blood into the Japanese yen. Japanese Finance Minister Shunichi Suzuki warned on Wednesday that the negative impact of an extremely weak yen would be much more on the economy rather than its constructive merit for exporters. However, the BOJ is determined to maintain its ultra-loose monetary policy with stimulus packages to achieve the growth rate recorded in the pre-pandemic period.

Meanwhile, Bank of England (BOE) Governor Andrew Bailey in his testimony at the International Monetary Fund (IMF) meeting warned of a further increase in inflation ahead. Higher price pressure may escalate more risks to the economy. Currently, the UK’s economy is facing higher energy and food prices, which have reduced the real income of households.

Next week, investors will focus on an interest rate decision by the BOJ, which is due on Thursday. The central bank is expected to keep the policy rates unchanged.