GBP/JPY trades lower near 185.60, extends losses on moderate Japan inflation

GBP/JPY trades lower around 185.60 during the Asian session on Friday, extending losses for the second consecutive day. The Japanese Yen (JPY) gets support from Japan’s moderate inflation data released early in the day. That said, National Consumer Price Index (YoY) remained consistent at the rate of 3.3%, better than the expected 2.5% in July. The annual National CPI ex Food, Energy improved to the reading of 4.3% from 4.2% in the previous month. While National CPI ex-Fresh Food reduced to figure 3.1% as expected, which was 3.3% prior.

Furthermore, the moderate trade data released from Japan on Thursday served as a supporting factor for JPY, potentially capping the gains of the GBP/JPY pair. The better-than-expected annual Export figure could offer some support to the JPY. It's worth noting that this figure actually declined compared to the previous reading, marking the first such decline in almost two and a half years.

The fall in Japan's export figure could be attributed to concerns over a global recession, particularly as China's demand weakens. China is a major trading partner for Japan, and a decrease in its demand for goods can ripple through global trade networks and affect the economy as it heavily relies on exports.

On the other hand, the market participants seek further clues on the upward strength in GBP/JPY pair as it has already shown strength, primarily driven by the improved earnings and inflation figures released during the week.

These resilient economic data could amplify the concerns over interest rate hikes by the Bank of England (BoE) in the September meeting. The market participants will closely watch the upcoming release of United Kingdom (UK) Retail Sales (MoM) later in the day. In July, consumer spending is expected to reduce to the reading of -0.5% from the 0.7% figure in the previous month.