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.

USD/JPY eyes August swing low, near 155.20 ahead of US NFP

USD/JPY retests the August monthly swing low during the Asian session on Friday as a more hawkish repricing of BoJ rate-hike bets and a suspected intervention continue to underpin the Japanese Yen. Meanwhile, the US Dollar is seen consolidating the previous day's heavy losses amid soft US bond yields, further weighing on the currency pair as traders keenly await the US NFP report.

AUD/USD consolidates above 0.7200; US NFP awaited

AUD/USD holds steady above 0.7200, near its highest level since mid-May, as bulls await the US NFP report for more cues on the Fed's policy path before placing fresh bets. Meanwhile, the recent decline in US bond yields keeps the US Dollar depressed near its lowest level in over a week and acts as a tailwind for the Aussie amid the RBA's hawkish tilt.

Gold tumbles as blockbuster US NFP lift US Dollar, Treasury yields

Gold (XAU/USD) falls sharply on Friday, snapping a two-day recovery after the US Nonfarm Payrolls (NFP) report surprised strongly to the upside. The metal briefly climbed above $4,500 on Thursday, gaining nearly 2%, but has since erased a large part of that advance.

Crypto’s $638 million buyback boom may not be as bullish as it looks

Decentralized Finance (DeFi) protocols reportedly spent $638 million to buy back their native tokens in August, up 17% from a year earlier. On the surface, the buyback trend suggests the cryptocurrency industry is maturing fast, adopting one of Wall Street’s oldest tools to bolster valuations and distribute revenue. The headline becomes less impressive once the number is opened up.

Why hawkish Bank of Japan expectations aren't enough to sustain the Japanese Yen rally

The Japanese Yen (JPY) experienced a sudden burst higher after falling back below the 160.00 psychological mark against the US Dollar (USD) earlier this week amid a more hawkish repricing of Bank of Japan (BoJ) rate hike expectations.

Diesel’s record $100 warning: The oil shock hiding in plain sight

The Oil market may look calmer than it did a few months ago, but diesel is sending a very different message. The US diesel crack spread, the premium of ultra-low sulphur diesel futures over WTI, recently surged above $100 per barrel for the first time, reaching an intraday record of just over $102.00.