GBP/JPY recovers early losses as UK GDP returns to growth

The GBP/JPY pair pared early losses and turned slightly positive near 213.20 during the European trading session on Thursday. The pair attracts orders as the British pound strengthens, following the release of monthly UK GDP data for November.

The Office for National Statistics (ONS) showed that the economy returned to growth after contracting by 0.1% in September and October. UK GDP growth came in at 0.3%, faster than estimates of 0.1%.

Meanwhile, factory data for November came in stronger than expected. On a monthly basis, industrial production rose at a strong pace of 2.1% versus estimates of 0.5% and October’s reading of 0.4%. In the same period, industrial production rose by 1.1%, strongly compared to expectations of 0.1%, but slower than the previous reading of 1.3%.

Going forward, the main catalyst for the British pound will be the UK employment and CPI data scheduled for next week. Investors will be paying close attention to the data for new signals about the Bank of England’s (BoE) monetary policy outlook.

During the European trading session, the Japanese Yen is struggling to maintain the strength it regained earlier in the day. The Japanese currency attracted buy orders amid fears that Tokyo would intervene to counter excessive moves in one direction. However, the broader outlook for the Japanese yen remains uncertain due to expectations for more flexible fiscal and monetary policy this year.

In addition, hopes that Prime Minister Sanae Takaishi will announce early elections next week also kept the yen’s recovery limited. Market experts believe that Japan’s budget unveils major spending plans to boost economic growth.