- GBP/JPY has displayed a momentum loss on higher forecasts for the UK Inflation.
- The BOJ minutes will disclose the ideology behind keeping a neutral stance on the interest rates.
- A majority of the annual inflation rate of 2.9% in Japan is contributed by soaring oil and food prices.
The GBP/JPY pair has witnessed a steep fall in the early Tokyo session after exhaustion in the upside momentum kicked in as investors are shifting their focus towards the UK Consumer Price Index (CPI) and minutes of the Bank of Japan (BOJ)’s June monetary policy meeting. Earlier, the cross displayed a sheer upside move to near 167.86 after giving an upside break of Friday’s high at 166.22.
As per the market consensus, the annual UK CPI is seen at 9.1%, marginally higher than the prior print of 9%. In comparison with the Western leaders, the UK economy is seldom operating at a whooping above 9% inflation rate. One could get an idea from that how much the households in the UK would be facing the headwinds from depreciated paychecks.
An annual inflation rate above 9% is sufficient to advance the odds of a recession in an economy. The Bank of England (BOE) is bound to tighten its policy, however, lower growth prospects are not providing much freedom to the central bank. This is restricting the BOE not to thinking beyond a quarter-to-a-percent rate hike as a higher rate elevation will shrink liquidity from the economy at a much more rapid pace.
On the Tokyo front, investors are awaiting the release of the BOJ’s minutes, which will dictate the ideology behind sticking to an ultra-loose monetary policy despite soaring price pressures. Well, one could understand through scrutiny that the inflation rate at 2.9% is highly contributed by expensive fossil fuels and costly food prices. However, the commentary from the BOJ on the same would be worth watching for.
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