GBP/JPY sees downside below 163.00 as market mood sours

• GBP/JPY is expected to witness more downside after violating 163.00 amid an active risk-off impulse.
• Political instability and Brexit issues have weakened the pound bulls against Tokyo.
• The market consensus for Japan's Industrial Production is in line with the former figures.

The GBP/JPY pair is displaying topsy-turvy moves in the Asian session. The cross has traded in a narrow range of 163.08-163.37, however, the downside remains favored amid a risk-off market mood. The release of the higher inflation rate by the US and the 100 basis points (bps) rate hike by the Bank of Canada (BOC) have not only tuned their respective currencies volatile. The outcomes have also accelerated recession fears in the global economy.

No doubt, the UK economy is going to face the heat significantly as the inflation rate has already sky-rocketed and dim growth prospects are not supporting the Bank of England (BOE) to dictate policy tightening with much freedom. The ongoing political instability in England after the resignation of UK Prime Minister Boris Johnson is challenging their growth prospects. Apart from that, the ongoing issues of the Northern Ireland Protocol (NIP) with the Eurozone are haunting the pound bulls.

Also, the upbeat UK economic data has failed to strengthen the sterling. The Gross Domestic Product (GDP) scaled higher to 0.5% vs. -0.3% reported previously on monthly basis. The Manufacturing production climbed to 2.3%, much higher than the prior release of 1.3%.

On the Tokyo front, investors are awaiting the release of the Japan Industrial Production data. The economic data is seen as stable at -2.8% and -7.2% on an annual and monthly basis respectively. Next week, the interest rate decision by the Bank of Japan (BOJ) will be of utmost importance. The odds are in favor of dovish commentary by BOJ Governor Haruhiko Kuroda.