The GBP/JPY pair is well-supported around 181.00 in the Asian session. The cross is getting the attention of buyers ahead of the United Kingdom Consumer Price Index (CPI) data (May), which will release on Wednesday.
Price pressures in the UK region have remained extremely stubborn in comparison with other developed economies after the pandemic. Major factors that have been fueling inflationary pressures in the Pound Sterling area are labor shortages and 45-year high food inflation.
The event of Brexit and early retirements taken by individuals have been crucial contributors to labor shortages, which forced firms to offer significantly higher payouts to offset the extreme demand for fresh talent.
As per the preliminary report, UK’s monthly headline inflation (May) is expected to show a pace of 0.4%, slower than the pace of 1.2% registered in April. Annualized headline CPI is seen softening to 8.5% vs. the prior release of 8.7% while core inflation that excludes oil and food prices is seen steady at 6.8%.
The UK inflation data will be followed by the interest rate decision from the Bank of England (BoE). Taking into account, tight Employment and stubborn inflation, BoE Governor Andrew Bailey is expected to hike interest rates further by 25 basis points (bps) to 4.75%.
On the Tokyo front, the consistent decline in the Japanese Yen has propelled expectations of a stealth intervention by the Bank of Japan (BoJ) in the FX domain. The BoJ has a history of intervening in FX operations to avoid further damage to their domestic currency.
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