GBP/JPY consolidates its gain above the 184.80 mark ahead of UK CPI

The GBP/JPY cross consolidates its recent gains near 184.80 during the Asian session on Wednesday. Markets turn cautious ahead of the release of the UK Consumer Price Index (CPI) data later in the European session.

On Tuesday, the number of people employed in the United Kingdom declined by 66,000, versus the market consensus of an increase of 75,000. The Average Earnings excluding bonuses, rose 7.8% YoY in the three months to June. This figure indicates the highest annual growth rate since records began in 2001, while Average Earnings including bonuses, reached 8.2%, the fastest pace since the coronavirus pandemic period. Meanwhile, the Unemployment Rate increased to 4.2% from 4%.

Market participants are cautious about the BoE's move as the UK economy is fragile and the interest rate is at a 15-year high of 5.25%. The aggressive monetary policy could negatively affect the British economy. However, market participants will take cues from the UK Consumer Price Index (CPI) and Retail Sales MoM for July, due later in the day. The upbeat data could boost the Pound Sterling and act as a tailwind for the GBP/JPY cross.

On the Japanese Yen front, the preliminary data of the Gross Domestic Product (GDP) figures for the second quarter (Q2) of 2023 shows that economic growth in Japan came in at 1.5% QoQ, versus 0.8% expected and 0.7% previously. Meanwhile, the annualised GDP increased to 6.0%, compared to 3.1% estimated and 2.7% previously.

Following the stronger than expected data on Tuesday, Japan’s Economy Minister Shigeyuki Goto stated that he anticipated a moderate economic recovery before mentioning the need to pay attention to the danger of a global downturn and the impacts of price increases. Goto demonstrated a willingness to respond flexibly to the economy and prices as needed. That said, the divergence between the dovish stance of the Bank of Japan (BoJ) and the hawkish stance of the Bank of England (BoE) leads to the weakening of the Japanese Yen against its major rivals.

Looking ahead, investors will closely watch the UK CPI. The annual and core inflation figures are expected to decline by 6.8%. On the Japanese docket, the nation’s Trade data and annual National Consumer Price Index for July will be released later this week.