GBP/JPY extends its gains on the upbeat UK economic data.
UK inflation and retail sales data reinforce the strength of the Pound Sterling.
Traders await Friday’s National Consumer Price Index data from Japan.
GBP/JPY moves on its upward trajectory for the third successive day, trading around 187.10 during the European session on Wednesday. The Pound Sterling (GBP) gained ground following solid economic data from the United Kingdom (UK) released on Wednesday, which in turn, underpinned the GBP/JPY cross. The likelihood of an early rate cut by the Bank of England (BoE) has diminished due to higher price pressures which could deter the central bank from implementing monetary policy easing. Instead, the BoE may adopt a more cautious approach to manage inflation and maintain price stability.
UK Consumer Price Index (CPI) year-over-year rose by 4.0% against the 3.9% prior, exceeding the expected reading of 3.8% in December. The monthly CPI increased by 0.4% against the 0.2% as expected, swinging from the previous decline of 0.2%. Meanwhile, the annual Core CPI remained consistent at 5.1% against the market expectation of 4.9%.
Moreover, the UK Retail Price Index (MoM) grew by 0.5% as compared to the expected 0.4% figure. The annual report showed a growth of 5.2% against the 5.1% expectations in December. However, Producer Price Index – Output (YoY) increased to 0.1% from the previous decrease of 0.1%, falling short of the expected 0.4% reading.
On the flip side, the Japanese Yen (JPY) continues to decline against the British Pound (GBP) due to decreasing consumer prices in Tokyo and weak labor data released last week. This has solidified expectations that the Bank of Japan (BoJ) will postpone its plan to shift away from its extremely accommodative monetary policy stance.
Additionally, the JPY has not found relief from a generally bearish sentiment in equity markets and ongoing geopolitical tensions arising from the Middle East conflict. Traders await Japan’s National Consumer Price Index data to be released on Friday.
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