GBP/JPY Holds Steady Below 193.00 Barrier After UK CPI Data

GBP/JPY remains in positive territory near 192.80 following disappointing UK inflation figures for February. The UK CPI increased by 3.4% year-on-year in February, falling short of the 3.6% estimate. The dovish stance taken by the Bank of Japan (BoJ) is weighing on the Japanese Yen (JPY) against the Pound Sterling (GBP). Investors are eagerly awaiting the Bank of England’s (BoE) interest rate decision on Thursday, which is expected to remain unchanged.

GBP/JPY is trading at 192.80, showing a 0.47% gain for the day during the early European trading hours on Wednesday.

According to the latest data from the UK Office for National Statistics, the Consumer Price Index (CPI) for February rose by 0.6% month-on-month, falling short of market expectations of a 0.7% increase. On an annual basis, the CPI increased by 3.4% year-on-year, down from 4.0% in January and below the market consensus of a 3.6% increase.

This report will influence the BoE’s decision on whether to signal its first interest rate cut or maintain its current stance of keeping rates higher for a longer period. The BoE is expected to maintain its interest rates at 5.25% for the fifth consecutive meeting on Thursday, as inflationary pressures ease.

BoE Governor Andrew Bailey stated after the February meeting that while there have been positive developments in inflation in recent months, policymakers need further evidence that inflation is moving towards the 2% target before considering lowering interest rates.

On Tuesday, the BoJ raised its interest rate by 10 basis points from -0.1% to 0% for the first time since 2007, as anticipated. However, the BoJ did not provide guidance on future policy direction, stating that financial conditions would remain accommodative for the time being. The uncertainty surrounding the pace of the BoJ’s policy normalization is putting downward pressure on the JPY and supporting the GBP/JPY cross.

Looking ahead, the Japanese Merchandise Trade Balance Total for February and Jibun Bank Manufacturing PMI for March are scheduled for release on Thursday. Market participants will focus on the BoE interest rate decision later in the day, which could provide clarity on the direction of the GBP/JPY cross.

GBP/JPY