GBP/JPY holds losses around 192.00 following soft UK inflation data
- GBP/JPY loses ground as the Pound Sterling loses ground after the weaker UK inflation data released on Wednesday.
- The UK Consumer Price Index increased by 2.5% YoY in December, staying above the BoE’s 2% target.
- The Japanese Yen rises due to hawkish remarks from BoJ Governor Kazuo Ueda.
GBP/JPY has surrendered its recent gains from the previous session, trading around 192.00 during early European hours on Wednesday. The GBP/JPY cross depreciates as the Pound Sterling (GBP) weakens following weaker-than-expected inflation data from the United Kingdom (UK).
The UK Consumer Price Index (CPI) increased by 2.5% year-over-year in December, down from 2.6% in November and below the market forecast of 2.7%. Despite the slowdown, the figure remained above the Bank of England’s (BoE) 2% target. On a monthly basis, the UK CPI rose to 0.3% in December, up from 0.1% in November but falling short of the expected 0.4%.
The annual core CPI, which excludes volatile food and energy items, grew by 3.2% in December, compared to a 3.5% increase in November, missing market expectations of 3.4%. Additionally, services inflation declined sharply to 4.4% year-over-year in December, down from 5% in November.
Moreover, the Japanese Yen (JPY) strengthened following hawkish remarks from Bank of Japan (BoJ) Governor Kazuo Ueda. Speaking at the BoJ branch managers' meeting on Wednesday, Ueda stated that the central bank "will raise rates and adjust the degree of monetary support if improvements in economic and price conditions continue." He also noted that a decision would be made next week while closely monitoring developments in the US economy.
Additionally, comments from Japan’s Finance Minister Katsunobu Kato heightened concerns about potential government intervention, further supporting the JPY. Kato expressed concern over "one-sided, rapid moves" in the currency market, emphasizing the importance of stable exchange rates that reflect economic fundamentals. He also noted alarm over foreign exchange movements, particularly those driven by speculative activity.
Economic Indicator
Consumer Price Index (YoY)
The United Kingdom (UK) 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. It is the inflation measure used in the government’s target. The YoY reading compares prices in the reference month to a year earlier. 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 Jan 15, 2025 07:00
Frequency: Monthly
Actual: 2.5%
Consensus: 2.7%
Previous: 2.6%
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.
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