The GBP/JPY cross came under pressure following the release of UK inflation data on Wednesday, snapping a three-day uptrend. Spot prices slipped below the 215.00 level during the early European session, though traders remain cautious about extending bearish positions given the mixed fundamental backdrop.
The British Pound weakened across major currencies after the Office for National Statistics reported that the headline Consumer Price Index rose 2.8% year-over-year in May, unchanged from April’s pace. The core CPI, which excludes volatile food and energy costs, increased 2.6% YoY versus 2.5% in April, slightly undershooting market expectations. These figures reinforced the view that the Bank of England will maintain interest rates for the foreseeable future, weighing on the pound and pressuring the GBP/JPY cross.
The Japanese Yen benefited from speculation that authorities may intervene to support the domestic currency, while the Bank of Japan’s recent rate hike to the highest level since 1995, along with plans to gradually reduce bond purchases, provided underlying support for the yen. However, Japanese borrowing costs still trail those of other major economies, keeping the carry trade dynamic intact and limiting broader yen strength.
Market attention now turns to upcoming UK labor market data and the next Bank of England policy meeting, which could provide directional cues for the pound. Given the current fundamentals, traders may await sustained breaks below key support levels before committing to further downside moves. On the upside, rally attempts would need to reclaim the 215.50 resistance level to suggest a continuation of the recent uptrend.