GBP/JPY rebounds from 166.50 ahead of UK/Japan PMIs, the spotlight is on Japan's Inflation

The GBP/JPY pair was portraying selling pressure in the early trade. The cross moved gradually lower in the initial hour and later extended its losses to near 166.45, however, some recovery has been witnessed. On a broader note, the asset is rock solid on the continuation of the ultra-loose monetary policy by the Bank of Japan (BOJ).

The June meeting minutes from the BOJ released on Wednesday dictated that the majority of the BOJ policymakers are in favor of sticking to a prudent monetary policy and injecting liquidity into the economy to support the aggregate demand. A weak yen is beneficial for increasing exports.

Although the annual inflation rate has comfortably crossed the target rate of 2%, the price pressures are mostly contaminated by healthy food and fossil fuel prices. Therefore, considering a hawkish tone on policy rates won’t be an optimal decision. Going forward, the release of the Japanese inflation will keep investors busy. As per the market consensus, the annual Japanese inflation rate is seen at 2.9%, higher than the prior print of 2.5%. While the core Consumer Price Index (CPI) may be half to 0.4%.

On the pound front, a higher inflation rate at 9.1% released on Wednesday has bolstered the odds of a 50 basis point (bps) interest rate hike by the Bank of England (BOE) in its July monetary policy. The UK economy is displaying the highest price rise rate than the other Western leaders.

In today’s session, the focus will remain on the Purchase Managers Index (PMI) figures. Japan’s Manufacturing PMI is seen at 54.4 vs. 53.3 recorded earlier. While the Services PMI may slip to 52.2 from the former figure of 52.6.

The UK’s Manufacturing PMI is seen lower at 53.7 from the prior print of 54.6. And, the Services PMI will slip to 53 vs. 53.4 prior.