GBP/JPY advances towards 189.50 following positive key economic figures from the UK

• GBP/JPY extends winning streak after UK economic data release.
• UK Gross Domestic Product expanded 0.6% QoQ in Q2, as expected, up from a 0.7% rise in Q1.
• The upside of the pair could be limited as the JPY receives support from a mood of sorts surrounding the BoJ.

GBP/JPY continues to gain ground for the fourth straight session, trading around 189.30 in early European hours on Thursday. The positive side of the GBP/JPY cross could be attributed to positive key economic data, including Gross Domestic Product (GDP) data from the United Kingdom (UK).

The British economy expanded by 0.6% quarter-on-quarter in the second quarter, in line with expectations. There was an increase of 0.7% in the first quarter. Meanwhile, GDP rose 0.9% y-o-y in Q2 versus an expected 0.9% and 0.3% booked in Q1. GDP rose 0% month-on-month in June, as expected, compared to a 0.4% increase reported in May.

On the manufacturing side, UK industrial production rose 0.8% month-on-month in June, comfortably beating market forecasts for a 0.1% increase and accelerating from a 0.3% rise in the previous month. Meanwhile, manufacturing output rose 1.1% month-on-month, beating expectations for a 0.1% rise. This marked the strongest expansion since February.

Chancellor of the Exchequer Rachel Reeves has set an official target for Britain to achieve the fastest per capita GDP growth among advanced Group of Seven (G7) economies for two consecutive years. However, Thursday’s figures showed that output per capita in the second quarter was 0.1 percent lower than a year earlier and 0.8 percent below pre-pandemic levels.

Minister Reeves stressed that the latest data underscores the challenges facing the new government and reiterated his position that tough decisions will be needed to improve economic fundamentals, according to Reuters.

The upside of the GBP/JPY cross may be limited as the Japanese yen (JPY) receives support as Japan’s GDP growth beat expectations in the second quarter. This supports the case for a potential short-term interest rate hike by the Bank of Japan (BoJ).

Japan’s Economy Minister Yoshitaka Shindo said he expected the economy to recover gradually as wages and incomes improved. He also noted that the government will work closely with the Bank of Japan to implement flexible macroeconomic policies.