The GBP/JPY pair continues to climb, reaching around 189.00 in early European trading on Wednesday. This upward movement comes in the face of a disappointing Consumer Price Index (CPI) report from the United Kingdom, which has raised concerns about potential interest rate cuts by the Bank of England.
In July, the UK CPI rose by 2.2% year-on-year, falling short of the expected 2.3% growth and just above the BoE’s 2.0% target. Additionally, the Core CPI, which excludes volatile items like food and energy, increased by 3.3% year-on-year, below market expectations of 3.4%. On a monthly basis, CPI decreased by 0.2%.
Despite these figures, the GBP/JPY pair remains strong, with safe-haven flows supporting the Yen amidst escalating tensions in the Middle East. The US deployed a guided missile submarine to the region, while Israeli forces conducted operations in Gaza resulting in casualties.
Looking ahead, expectations of the Bank of Japan hiking rates in 2024 are bolstering the Yen. Japan’s parliament is set to discuss the BoJ’s recent interest rate decision in a special session on August 23.
Economic Indicator: Consumer Price Index (YoY)
The UK Consumer Price Index (CPI) is a key measure of inflation, reflecting the rate at which prices of goods and services purchased by households rise or fall. The YoY reading compares prices from the current month to a year earlier. A high reading is typically bullish for the Pound Sterling, while a low reading is bearish.
For more information on this economic indicator, click here.