- The GBP/JPY is stuck in the middle near 183.00 as markets await inspiration.
- UK CPI came in less than expected, and investors will be pivoting to keep an eye on the BoE next.
- UK inflation appears to be easing off faster than markets expected, trapping the BoE into one more rate hike.
The GBP/JPY is strung along the 183.00 handle in Wednesday trading. The United Kingdom’s (UK) inflation reading during the European market session failed to bolster the Pound Sterling (GBP) after the headline printing failed to meet the mark. Guppy traders will now be keeping their heads low ahead of Thursday’s Bank of England (BoE) showing.
UK CPI misses the mark, BoE incoming with another rate call
UK Consumer Price Index (CPI)figures broadly came in below expectations. August’s monthly inflation printed at 0.3%, compared to the forecast 0.7%, though still an improvement from the previous period’s 0.4% decline.
The UK Retail Price Index also failed to meet market expectations, coming in at 0.6% for the same period. The last print came in at -0.6%, and markets were hoping for 0.9%.
Inflation within the British economy appears to be falling faster than investors initially anticipated, and the swooning pace of price growth will keep the BoE firmly on their path of ‘one and done’. Markets are expecting the UK’s central bank to deliver one more 25-basis-point rate hike tomorrow at 11:00 GMT. The expected hike will bring the BoE’s benchmark rate to 5.5%.
After the BoE’s showing on Thursday, all that remains for the GBP/JPY this week will be the Bank of Japan’s (NoJ) rate call on Friday, along with the UK’s Purchasing Manager Index (PMI) figures.
The BoJ’s interest rate regime is broadly expected to remain at -0.1%, while the UK’s composite PMI reading is forecast to improve slightly, from 48.6 to 48.7. UK Retail Sales will also be landing on Friday, which is expected to rebound from -1.2% to 0.5%.
UK Retail Sales and composite PMI are scheduled to drop at 06:00 and 08:30 GMT, respectively.
GBP/JPY technical outlook
The Guppy has been struggling to put distance between itself and the 183.00 level recently, and current action has been under pressure from the 200-hour Simple Moving Average (SMA) currently sinking from the 183.40 region.
The GBP/JPY sunk to a session low just beneath the 182.50 level after the UK’s CPI reading missed the mark, but market flows recovered to keep the pair relatively flat on the day.
On the daily candlesticks, the pair has been consolidating for the better part of a week, trapped near 183.00. The 100-day SMA is providing rising support from the 180.00 major handle, and traders will want to wait for a confirmation before assuming a breakout from the current consolidation zone is a done deal.
GBP/JPY daily chart
GBP/JPY technical levels
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