British Pound attracts bids against Japanese Yen after mixed UK CPI data

The British Pound rebounds against the Japanese Yen from 218.20 after the UK CPI data release.
The UK headline inflation cooled down at a faster-than-expected pace, with the core figure remaining steady, both at 2.6% YoY.
Sheer weakness in the Japanese Yen has heightened hopes of Japan’s intervention.

Sagar Dua FXStreet

The British Pound (GBP) witnesses slight buying interest against its major currency peers after the release of the United Kingdom (UK) Consumer Price Index (CPI) data for June. Against the Japanese Yen (JPY), the British currency rebounds strongly from the intraday low of 218.20.

The Office for National Statistics (ONS) has reported a slower-than-expected headline CPI growth. The headline inflation arrives at 2.6% Year-on-Year (YoY), lower than the estimates of 2.7% and the previous reading of 2.8%. On a monthly basis, the headline inflation rises at a moderate pace of 0.1%, as expected, against the previous reading of 0.2%.

However, the core CPI – which excludes volatile components such as food, energy, alcohol, and tobacco – grew steadily by 2.6% YoY, while it was expected to cool down to 2.5%.

Inflation in the service sector, which is closely tracked by Bank of England (BoE) officials, cooled down to 3.6% from 3.7% in May.

Slowing UK headline and services inflation growth is expected to ease fears of interest rate hikes by the BoE in the near-term.

Meanwhile, investors brace for more volatility in the British currency this week as the Retail Sales data for June and the preliminary S&P Global PMI data for July are lined up for release on Friday.

On the Tokyo front, investors expect Japan’s intervention in the forex market, following the decline in the Japanese Yen towards multi-decade lows against its major peers.

Earlier in the day, Japan’s Finance Minister (FM) Satsuki Katayama said that the authorities will take necessary steps on the foreign exchange if necessary. However, she declined to comment on specific forex levels.

Economic Indicator

Core Consumer Price Index (YoY)

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.

Why it matters to traders?

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.

Author

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

AUD/USD breaks 0.7000 as RBA inflation warning fuels two-week high

The Australian Dollar registers solid gains versus the Greenback, climbing above 0.7000 and hitting a two-week high of 0.7017 as broad US Dollar weakness pushes AUD/USD above 0.7000 amid a light economic docket in both Australia and the US.

USD/JPY flatlines near 158.50 as markets seek direction

USD/JPY steadies around 158.50 in the Asian trading hours on Tuesday. Traders prefer to wait on the sidelines ahead of Japan’s National Consumer Price Index inflation data later on Friday. Meanwhile, elevated US bond yields provide some support to the US Dollar against the Japanese Yen.

Gold just failed at $4,150. This is the next stop

Gold prices trade without a clear direction on Tuesday, hovering around the $4,170 region per troy ounce and still struggling to regain upside traction following Monday’s pullback. In the meantime, lower US Treasury yields and a marked pullback in the US Dollar come in tandem with the yellow metal’s price action.

Bitcoin resumes Nasdaq correlation as macro pressures threaten $82,500 support

Bitcoin's (BTC) correlation with the Nasdaq is rising again after last week's decline alongside tech stocks, even as macro pressures place the $82,500 support at risk. In a report on Tuesday, K33 Research highlighted that Bitcoin has resumed its correlation with the tech-heavy Nasdaq after last week's price movements.

SpaceX's earnings don't matter. What they unlock does

The Elon Musk-founded SpaceX reports third-quarter results after Tuesday's session. The figure that decides the next month for the stock isn't in them. On Thursday, the second full trading day after the release, up to 1.3 billion shares held by employees and early investors become eligible for sale.

The US Dollar fell. Gold didn't rally. That tells you everything

Gold (XAU/USD) is struggling to capitalize on a weaker US Dollar (USD), after repeatedly failing to establish itself above the $4,200 level. The precious metal remains confined to a relatively narrow trading range despite a combination of developments that would normally support higher prices.