GBP/JPY jumps back above 193.00 on hotter UK CPI print, lacks follow-through amid stronger JPY

• GBP/JPY bounces off daily low as hotter UK inflation figures temper BoE rate cut bets.
• BoJ rate hike bets underpin the JPY amid reviving safe-haven demand and cap the cross.
• A break below the 200-day SMA is needed to support prospects for any further losses.

The GBP/JPY cross trims a part of its modest intraday losses following the release of hotter-than-expected UK consumer inflation figures, though it lacks follow-through buying. Spot prices currently trade around the 193.20 region, down over 0.15% for the day amid a broadly stronger Japanese Yen (JPY).

Data released by the UK Office for National Statistics (ONS) earlier this Wednesday showed that the headline annual Consumer Price Index (CPI) jumped from the 2.6% seen in the prior month to 3.5% in April, the highest level in over a year. Adding to this, the annual core CPI, which excludes volatile energy and food prices, rose 3.8% compared to 3.4% in March. The readings were well above consensus estimates and the Bank of England's (BoE) 2.0% medium-term target, forcing investors to scale back their expectations for more rate cuts in 2025 and boosting the British Pound (GBP).

Traders, however, are still pricing in the possibility that the UK central bank will lower borrowing costs at least once by the year-end. This marks a sharp divergence in comparison to the growing acceptance that the Bank of Japan (BoJ) will hike interest rates again amid fears of broader and more entrenched price increases in Japan. Furthermore, reviving safe-haven demand, bolstered by renewed US-China trade tensions and persistent geopolitical risks, benefits the JPY. This, in turn, keeps a lid on the GBP/JPY pair's intraday recovery of around 40 pips from the 192.85-192.80 region.

Nevertheless, the mixed fundamental backdrop makes it prudent to wait for strong follow-through selling below the 200-day Simple Moving Average (SMA) before positioning for an extension of the recent pullback from over a four-month high touched last week.