GBP Jumps on Stronger-than-Expected UK Growth

The British Pound (GBP) has rebounded against the Japanese Yen (JPY), reaching 208.65 in trading hours on Wednesday, after data from the Office for National Statistics showed a stronger-than-expected UK economy. The upward revision to UK economic growth surpassed expectations of 0.4%, with quarter-on-quarter growth at 0.5% and annual GDP growth at 1.4%. This has given the Bank of England (BoE) more room to focus on bringing inflation back to its target, potentially leading to higher interest rates in the future.

Traders are pricing in around 33 basis points of rate increases by year-end, with over 100 basis points expected by the end of 2027. However, strategists at BBH note that tighter fiscal policy in the UK's Autumn Budget could reduce the need for interest rate hikes and leave the Pound vulnerable to a dovish BoE repricing.

On the other hand, fresh data from Japan showed Retail Trade growing 2.7% YoY in August, below expectations of 3.3%, while Large Retailer Sales growth eased to 1.0%. Traders now await Tokyo Consumer Price Index (CPI) and Unemployment Rate due on Friday.