The GBP/JPY surged sharply on Wednesday, posting gains of more than 1.22% or over 230 pips, driven by a hotter-than-expected U.S. inflation report that strengthened the U.S. Dollar and weakened the Japanese Yen (JPY) across most major currencies. At the start of Thursday’s session, the cross-pair was trading at 191.99.
The U.S. CPI data revealed that inflation had reached 3% year-over-year, surpassing expectations and marking its fifth consecutive month of increases. Core CPI, which excludes volatile items, rose to 3.3% YoY, up from 3.1%, signaling persistent inflationary pressures.
U.S. Federal Reserve Chair Jerome Powell reinforced the hawkish sentiment by emphasizing that the Fed’s efforts to tame inflation were far from over, and monetary policy would remain restrictive for the time being.
Meanwhile, Bank of Japan (BoJ) Governor Kazuo Ueda addressed the Japanese parliament, suggesting that the rising prices of fresh foods could have a lasting impact on consumer sentiment. He reaffirmed that recent rate hikes were appropriate but noted that future policy adjustments would depend on the evolving economic situation, leaving markets uncertain about the BoJ’s next move.
GBP/JPY Traders Await UK GDP Data
Traders are closely watching the upcoming release of the UK’s Gross Domestic Product (GDP) figures, with economists predicting a contraction for the fourth quarter. However, the UK economy is expected to grow on an annual basis, which may add volatility to the GBP/JPY cross. The Bank of England’s (BoE) hawkish stance, combined with the BoJ’s dovish tilt, continues to favor downside potential for the currency pair.
GBP/JPY Technical Outlook:
The GBP/JPY has seen a steady upward move over the past three days and may extend its gains past the key 192.00 level. However, the pair remains under pressure, trading below both the 200-day Simple Moving Average (SMA) at 195.11 and the Ichimoku Cloud (Kumo), indicating a downside bias.
For further bullish momentum, buyers need to clear the 50-day SMA at 193.35 before targeting the Senkou Span B at 193.96. A break above this level would bring the 200-day SMA into focus. On the downside, if the pair drops below 191.00, the next support level lies at the Senkou Span A at 190.75, followed by further losses toward the Tenkan-sen at 190.09.
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