GBP/JPY drops below 172.00 amid higher-than-projected Japan Inflation

The GBP/JPY pair has witnessed a steep fall after failing to sustain above the immediate resistance of 172.00 in the Asian session. The cross has faced selling pressure as the Statistics Bureau of Japan has reported higher-than-anticipated inflation data for April.

National headline Consumer Price Index (CPI) jumped to 3.5% from the prior release of 3.2% while the street was anticipating a deceleration to 2.5%. Core CPI that doesn’t include food and energy prices accelerated to 4.1% vs. the consensus of 3.4% and the former release of 3.8%.

The release of the higher-than-projected inflation numbers would provide some relief to Bank of Japan (BoJ) policymakers but won’t impact their prolonged ultra-dovish policy stance. BoJ Kazuo Ueda has already conveyed that inflation projections are softening and the central bank would do whatever is required to keep inflation steadily above the 2% target.

Meanwhile, the Pound Sterling has remained solid in the past few trading sessions as the United Kingdom inflation is not showing promising signs of deceleration ahead. Investors are anticipating that the Bank of England (BoE) would not bring down inflation to half by the end of the year. BoE Governor Andrew Bailey has already conveyed that they underestimated the strength and persistence of inflation.

Further, UK Finance Minister Jeremy Hunt has promised a decline in tax burden from households, which would fuel retail demand further.

On Thursday, the UK Office for National Statistics (ONS) reported that 18% of UK firms are looking to pass on the impact of higher input prices and costly employment to end-consumers vs. 23% of firms recorded in the last survey.