GBP/JPY soars as hot US inflation weakens Yen

GBP/JPY jumps 1.22% after hot US CPI lifts dollar, pressures yen.
BoJ’s Ueda signals concern over rising food prices but remains cautious on rate hikes.
UK GDP data in focus; BoE’s hawkish stance could limit downside risks.

Christian Borjon Valencia FXStreet

The GBP/JPY rose sharply during Wednesday’s session, posting gains of over 1.22% or 230 plus pips after a hot US inflation report sent the Greenback higher and pushed the Japanese Yen (JPY) lower against most G8 FX currencies. At the time of writing, the cross-pair trades at 191.99 as Thursday’s session began.

Pound gains over 230 pips as BoJ stance remains unclear

Inflation in the US hit 3% YoY, cleared that threshold for the first time in six months, and increased for the fifth consecutive month. Excluding volatile items, the so-called core CPI rose by 3.3% YoY, up from 3.1%.

In the meantime, Fed Chair Powell crossed the newswires and maintained its hawkish stance, commenting that the job on inflation is not completed and that monetary policy needs to be restrictive for now.

During the Asian session, Bank of Japan (BoJ) Governor Kazuo Ueda addressed the parliament and said that rising prices of fresh foods may not be temporary and may affect people’s sentiment. He emphasized that rate hikes have been appropriate and that further policy adjustments would depend on economic situations.

GBP/JPY traders are eyeing the UK's release of Gross Domestic Product (GDP) figures. Economists estimate Q4’s GDP will contract, even though the economy will grow annually. This, along with the Bank of England's (BoE) and BoJ’s hawkish stance, ‘dovish tilt, favors further downside on the cross-pair.

GBP/JPY Price Forecast: Technical outlook

The GBP/JPY has risen for the last three days and is poised to extend its gains past the 192.00 figure. However, the cross-pair remains tilted to the downside, with price action remaining below the 200-day Simple Moving Average (SMA) at 195.11 and under the Ichimoku Cloud (Kumo).

If buyers want to regain control, they must clear the 50-day SMA at 193.35 before testing the Senkou Span B at 193.96. Once surpassed, up next lies the 200-day SMA. On the flip side, if USD/JPY falls below the 191.00 mark, the next support would be the Senkou Span Aat 190.75. further losses below the Tenkan-sen at 190.09.

Economic Indicator

Gross Domestic Product (MoM)

The Gross Domestic Product (GDP), released by the Office for National Statistics on a monthly and quarterly basis, is a measure of the total value of all goods and services produced in the UK during a given period. The GDP is considered as the main measure of UK economic activity. The MoM reading compares economic activity in the reference month to the previous month. Generally, a rise in this indicator is bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.

EUR/USD trims gains, back below 1.1800

EUR/USD now loses some upside momentum, returning to the area below the 1.1800 support as the Greenback manages to regain some composure following the SCOTUS-led pullback earlier in the session.

GBP/USD off highs, recedes to the sub-1.3500 area

Following earlier highs north of 1.3500 the figure, GBP/USD now faces some renewed downside pressure, revisiting the 1.3490 zone as the US Dollar manages to regain some upside impulse in the latter part of the NA session on Friday.

Gold climbs to weekly tops, approaches $5,100/oz

Gold keeps the bid tone well in place at the end of the week, now hitting fresh weekly highs and retargeting the key $5,100 mark per troy ounce. The move higher in the yellow metal comes in response to ongoing geopolitical tensions in the Middle East and modest losses in the US Dollar.