GBP/JPY retreats from yearly high, holds above 200.00 ahead of UK jobs report

GBP/JPY drifts lower on Tuesday and snaps a three-day winning streak to the YTD peak.
BoJ rate hike bets benefit the JPY and exert some downward pressure on spot prices.
Traders look to the UK jobs data for a short-term impetus ahead of key central bank events.

Haresh Menghani FXStreet

The GBP/JPY cross attracts some selling during the Asian session on Tuesday and for now, seems to have snapped a four-day winning streak to its highest level since July 2024, around the 200.75 region, touched the previous day. Spot prices, however, manage to hold above the 200.00 psychological mark as traders look forward to the UK employment details for a fresh impetus ahead of the key central bank events.

The UK jobs report, along with Consumer Price Index (CPI) on Wednesday, could offer critical insight into the trajectory of inflation and its wider implications on monetary policy. A stronger-than-expected CPI print could further reduce the odds for an immediate interest rate cut by the Bank of England (BoE), which is scheduled to announce its policy decision on Thursday. This, in turn, could provide a goodish lift to the British Pound (GBP) and assist the GBP/JPY cross to attract some dip-buyers at lower levels.

Ahead of the key data, a broadly firmer Japanese Yen (JPY) exerts some downward pressure on spot prices. Despite domestic political turmoil, investors seem convinced that the Bank of Japan (BoJ) will stick to its policy normalization path, which, in turn, is seen as a key factor underpinning the JPY. That said, the uncertainty over the likely timing and the pace of rate hikes by the BoJ might cap gains for the JPY and help limit deeper losses for the GBP/JPY cross.

Furthermore, the prevalent risk-on environment – as depicted by a generally positive mood around the equity markets – could offer some support to the currency pair. Hence, it will be prudent to wait for strong follow-through selling before confirming that the GBP/JPY cross has topped out in the near-term and positioning for any meaningful corrective decline.

(The story was corrected on September 16 at 05:39 GMT, to say in the title, the third bullet point and the first paragraph that traders now look to UK jobs data, and not UK CPI.)

Economic Indicator

Consumer Price Index (YoY)

The United Kingdom (UK) 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. It is the inflation measure used in the government’s target. The YoY reading compares prices in the reference month to a year earlier. 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

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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