- A combination of factors failed to assist GBP/JPY to capitalize on its intraday positive move.
- The prevalent cautious mood benefitted the safe-haven JPY and capped any meaningful gains.
- Stronger UK inflation figures extended some support to the GBP and helped limit the downside.
The GBP/JPY cross retreated around 30-35 pips from daily tops and was last seen trading with only modest gains, just above the key 155.00 psychological mark.
The cross struggled to capitalize on its intraday positive move, instead met with some fresh supply near the 155.35-40 region amid a modest pickup in demand for the Japanese yen. Nervousness ahead of the highly-anticipated FOMC policy decision was evident from a softer tone around the equity markets. This, in turn, benefitted traditional safe-haven currency and was seen as a key factor that capped the upside for the GBP/JPY cross.
On the other hand, the British pound was supported by a subdued US dollar demand and hotter-than-expected UK inflation figures. The UK Office for National Statistics (ONS) reported this Wednesday that the headline UK CPI held steady at 0.6% MoM in May and accelerated 2.1% on a yearly basis from 1.5% YoY previous. Excluding volatile food and energy items, the Core CPI rose 2.0% YoY during the reported month against 1.5% anticipated.
The supporting factor, to a larger extent, was offset by concerns about the EU-UK stand-off on the Northern Ireland protocol. This, along with the UK government’s decision to delay the final stage of easing lockdown measures, continued acting as a headwind for the sterling. Nevertheless, the GBP/JPY cross, so far, has held within the previous day’s broader trading range as investors await fresh catalyst before placing directional bets.
Technical levels to watch