Created
: 2024.09.18
2024.09.18 17:56
The GBP/JPY cross attracts some dip-buyers following an intraday slide to the 185.80 area and climbs to the top end of its daily range during the first half of the European session on Wednesday. Spot prices currently trade around the 187.25-187.30 region, just below a one-week high touched on Tuesday, though the fundamental backdrop warrants caution before positioning for an extension of this week's bounce from the vicinity of the monthly low.
The British Pound (GBP) rallies across the board following the release of the UK Consumer Price Index (CPI) report, which fueled expectations that the Bank of England (BoE) would hold rates steady and acted as a tailwind for the GBP/JPY cross. In fact, the UK Office for National Statistics (ONS) reported that the core CPI (excluding volatile food and energy items) accelerated to the 3.6% YoY rate in August from 3.3% previous.
Adding to this, the UK August Services CPI inflation climbed 5.6% during the reported period as compared to the 5.2% in July and the headline print held steady at 2.2%. This, in turn, raises hopes that the BoE's rate-cutting cycle is more likely to be slower than in the United States (US) and the Eurozone. The upside for the GBP/JPY cross, however, remains capped as traders seem reluctant ahead of the key central bank event risks.
The BoE is scheduled to announce its decision on Wednesday and the market pricing suggests a little chance of an interest rate cut, though the possibility of a reduction in November remains on the table. The focus will then shift to the Bank of Japan (BoJ) policy update on Friday, which will play a key role in influencing demand for the Japanese Yen (JPY) and help in determining the next leg of a directional move for the GBP/JPY cross.
Hence, a strong follow-through buying is needed to confirm that spot prices have formed a near-term bottom around the 183.70-183.75 region, or a one-month low touched last Wednesday. Nevertheless, the GBP/JPY cross, for now, seems to have snapped a two-day winning streak ahead of the BoE and the BoJ meetings. In the meantime, the critical Fed decision might infuse some volatility and produce short-term opportunities.
The United Kingdom (UK) Core Consumer Price Index (CPI), released by the Office for National Statistics on a monthly basis, is a measure of consumer price inflation - the rate at which the prices of goods and services bought by households rise or fall - produced to international standards. The YoY reading compares prices in the reference month to a year earlier. Core CPI excludes the volatile components of food, energy, alcohol and tobacco. The Core CPI is a key indicator to measure inflation and changes in purchasing trends. Generally, a high reading is seen as bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.
Read more.Last release: Wed Sep 18, 2024 06:00
Frequency: Monthly
Actual: 3.6%
Consensus: 3.5%
Previous: 3.3%
Source: Office for National Statistics
The Bank of England is tasked with keeping inflation, as measured by the headline Consumer Price Index (CPI) at around 2%, giving the monthly release its importance. An increase in inflation implies a quicker and sooner increase of interest rates or the reduction of bond-buying by the BOE, which means squeezing the supply of pounds. Conversely, a drop in the pace of price rises indicates looser monetary policy. A higher-than-expected result tends to be GBP bullish.
Created
: 2024.09.18
Last updated
: 2024.09.18
FXStreet is a forex information website, delivering market analysis and news articles 24/7.
It features a number of articles contributed by well-known analysts, in addition to the ones by its editorial team.
Founded in 2000 by Francesc Riverola, a Spanish economist, it has grown to become a world-renowned information website.
We hope you find this article useful. Any comments or suggestions will be greatly appreciated.
We are also looking for writers with extensive experience in forex and crypto to join us.
please contact us at [email protected].
Disclaimer:
All information and content provided on this website is provided for informational purposes only and is not intended to solicit any investment. Although all efforts are made in order to ensure that the information is correct, no guarantee is provided for the accuracy of any content on this website. Any decision made shall be the responsibility of the investor and Myforex does not take any responsibility whatsoever regarding the use of any information provided herein.
The content provided on this website belongs to Myforex and, where stated, the relevant licensors. All rights are reserved by Myforex and the relevant licensors, and no content of this website, whether in full or in part, shall be copied or displayed elsewhere without the explicit written permission of the relevant copyright holder. If you wish to use any part of the content provided on this website, please ensure that you contact Myforex.
Myforex uses cookies to improve the convenience and functionality of this website. This website may include cookies not only by us but also by third parties (advertisers, log analysts, etc.) for the purpose of tracking the activities of users. Cookie policy