The British Pound (GBP) remains under pressure against the Japanese Yen (JPY), hovering near 191.50 in early European trading on Wednesday. The decline follows the release of the UK’s Consumer Price Index (CPI) data, which showed stronger-than-expected inflation figures.
UK Inflation Surpasses Expectations
According to the Office for National Statistics (ONS), annual CPI inflation rose to 3.0% in January, exceeding the expected 2.8% and December’s 2.5% increase. While monthly inflation dipped to -0.1% from December’s 0.3% rise, it still outperformed market projections of -0.3%. Core CPI, which excludes volatile items such as food and energy, climbed to 3.7% year-over-year, in line with forecasts but accelerating from 3.2% in December. Additionally, services inflation surged to 5.0%, up from the previous 4.4%, signaling persistent price pressures in key sectors.
Japanese Yen Gains on BoJ Rate Hike Speculation
The GBP/JPY pair weakened as the Japanese Yen found support amid growing speculation that the Bank of Japan (BoJ) may continue tightening monetary policy to combat inflation. However, the JPY’s gains could be limited by disappointing economic data from Japan.
Japan’s core machinery orders fell 1.2% month-on-month in December, marking the sharpest decline in four months and reversing November’s 3.4% growth. This missed market expectations of a modest 0.1% increase. Additionally, Japan’s trade deficit widened significantly to JPY 2,758.78 billion in January, far exceeding market estimates of JPY 2,100 billion. Imports surged 16.7% year-over-year to a 26-month high, while exports grew at a slower 7.2%, missing forecasts of 7.9%.
Market Outlook
While the Pound struggles amid inflation concerns and BoE policy uncertainty, the Yen remains supported by rate hike expectations. However, weak Japanese economic data may limit further JPY strength. Traders will closely watch upcoming economic releases for further direction in the GBP/JPY pair.
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