GBP/JPY floundering as BoE looms ahead, UK interest rates set to rise once more

• The GB/JPY is flubbing trading on Monday, down near the day’s lows of 182.80.
• The early week sees inflation figures for the UK ahead of Thursday’s BoE rate call.
• The UK’s rates are expected to climb at least one more time in the current rate cycle.

The GBP/JPY is pinned to the low end through Monday’s trading, failing to establish bullish momentum and sliding into familiar bearish territory below 183.00.

The Consumer Price Index (CPI) figures for the United Kingdom (UK) slated for early Tuesday at 06:00 GMT are expected to show that inflation remains a sticky mess for the UK’s economy. August’s CPI is forecast to bounce to 0.7%, a notable rebound from the previous month’s 0.4% decline.

Inflation remains a problematic area for the Bank of England (BoE) even as data for the UK’s economy flashing warnings that growth is stumbling. The BoE is expected to raise benchmark interest rates by 25 basis points to 5.5% on Thursday.

BoE & BoJ both scheduled for this week, UK inflation figures landing on Friday

The Guppy sees a central bank double-feature this week, with the Bank of Japan (NoJ) scheduled to hold their interest rates steady at -0.1% on Friday.

The BoJ’s negative rate cycle has been a key feature for the Japanese economy as the country struggles to develop long-term fundamental growth. Inflation in Japan briefly soared in recent months, but price increases are expected to slump through the fourth quarter, and the Japanese central bank will be hoping to keep inflation above their minimum target of 2%.

BoJ officials have made comments recently hinting that the Japanese central bank could be set to end its negative rate regime heading into 2024, but that will require firm data suggesting that the Japanese domestic economy has finally solved its problematic lack of inflation.

Friday will also see Retail Sales data for the UK, with retail activity for August expected to jump up 0.5% compared to the previous month’s 1.2% backslide.

Preliminary UK Consumer Price Index (CPI) figures are also slated for Friday, which are forecast to hold steady at 48.6 for the composite component. The Manufacturing PMI is forecast to hold steady at 43, with the Services PMI component expected to tick slightly lower from 49.5 to 49.

Any upside surprises for inflationary data could send the GBP soaring against the JPY as spiraling costs will mean the BoE still has hurdles to overcome using further hikes.

GBP/JPY technical outlook

Despite the near-term flattening for the Guppy, the GBP/JPY pair is firmly at the top end of the charts. The Pound Sterling (GBP) has chalked in gains against the Yen (JPY) for the past eight months, rising firmly from January’s lows near 155.35.

Daily candlesticks have the GBP/JPY slipping the 34-day Exponential Moving Average (EMA), and set to test recent support at the 180.00 major handle.

Long-term bullish momentum for the Guppy has left the pair stranded well above the 200-day Simple Moving Average, currently far below price action near 171.00, and GBP bulls will be looking to mount a recovery rally from here to take a run at reclaiming territory near the 186.00 level.

GBP/JPY daily chart

GBP/JPY technical levels