- GBP/JPY recovery appears to have slowed near 200.00 as UK Inflation comes under the spotlight.
- The UK annual headline inflation is expected to return to BoE’s 2% target.
- The BoJ postponed plans to reduce bond-buying operations.
The GBP/JPY pair struggles to extend recovery above the psychological resistance of 200.00 in Tuesday’s New York session. The cross is expected to trade sideways as investors shift focus to the United Kingdom (UK) Consumer Price Index (CPI) data for May, which will be published on Wednesday.
Economists expect that the UK Office for National Statistics (ONS) will report a sharp decline in the annual core CPI, which strips off the more volatile items, to 3.5% from 3.9% in April. In the same period, the headline inflation is expected to return to the bank’s target of 2.0% from the prior reading of 2.3%. The monthly headline inflation is estimated to have grown at a faster pace of 0.4% from 0.3% in April.
A more-than-expected decline in UK inflation data will boost expectations of early rate cuts by the Bank of England (BoE). Though headline inflation is expected to return to 2%, investors will keenly focus on service inflation, which has been a major barrier to the BoE’s move towards policy normalization.
Inflation in the UK service sector is majorly driven by strong growth, which has turned out to be persistent in the past few months. Average earnings excluding bonuses, which is a measure of wage inflation, have grown steadily by 6.0% for a straight three-period period. The pace at which wages are growing is significantly higher than what is needed to build confidence among BoE officials to consider rate cuts.
On the Tokyo front, the Japanese Yen is weak across the FX domain as the Bank of Japan (BoJ) pushes plans of tapering bond-buying operations to the July meeting. BoJ Governor Kazuo Ueda left interest rates unchanged but didn’t rule out expectations for further policy tightening in July.
This week, the major trigger for the Japanese Yen will be the National CPI data for May, which will be published on Friday. National CPI excluding Fresh Food is estimated to have accelerated to 2.6% from the prior reading of 2.2% on a year-on-year basis.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD: Gains remain capped below 0.6500 after soft Australian CPI data
AUD/USD consolidates the latest uptick below 0.6500 in Wednesday's Asian trading, capitalizing on a modest optimism and a broad US Dollar weakness. The upside, however, remains capped by the softer Australian CPI inflation data for October. US data are next in focus.
USD/JPY stays pressured below 153.00, US data eyed
USD/JPY declines to over a two-week low below 153.00 early Wednesday as Trump's tariff threats continue to drive haven flows into the Japanese Yen. However, doubts over the BoJ's ability to tighten its monetary policy further should cap the USD/JPY downside ahead of US data.
Gold: Bear Cross cautions XAU/USD buyers ahead of US inflation test
Gold price has found fresh demand, looking to extend the previous rebound toward $2,650 in Wednesday's Asian trading. The ongoing US Dollar weakness and sluggish US Treasury bond yields allow Gold price to gain traction amid a cautiously optimistic market mood. US data awaited for fresh impetus.
Ripple's XRP sees decline as realized profits reach record levels
Ripple's XRP is down 6% on Tuesday following record profit-taking among investors as its percentage of total supply in profit reached very high levels in the past week.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.