- The GBP/JPY pair plummeted to the 181.00 area after the Bank of England backtracked on its planned rate hike.
- Inflation could be falling faster than thought in the UK, rapidly cooling rate expectations.
- UK Retail Sales and PMI are released on Friday.
The GBP/JPY pair fell out of its recent trading range, crashing into the 181.00 level before GBP bulls were able to stage a slight intraday recovery to keep the Guppy trading at 181.30 late on Thursday.
The Bank of England is moderate regarding the decline in inflation
The UK Consumer Price Index (CPI) came in below expectations on Tuesday at 0.3%, compared to the 0.7% expected. The decline in headline inflation was enough for the UK Central Bank to back off raising rates as inflation appears to be receding faster than expected.
The Bank of England (BoE) departed from the rate hike cycle, maintaining its reference interest rate at 5.25%, compared to the planned 25 basis point rise to 5.5%.
The Bank of Japan is also expected to keep interest rates at -0.1% at its meeting on Friday.
Retail sales and the UK Purchasing Managers’ Index (PMI) will also be released on Friday. August retail sales are expected to rebound from -1.2% to 0.5%, and the composite PMI index is expected to rise slightly to 48.7 from 48.6.
The recent drop in CPI could cause UK economic data to come in below expectations, pushing the Bank of England to back off its forward rate expectations.
GBP/JPY Technical Outlook
The GBP/JPY fell one percentage point following the Bank of England’s rate decision, taking the GBP/JPY to the 181.00 zone. The British Pound bulls managed to recover the pair to 181.30 but the decline continues if buyers fail to push the pair back towards the 200 hourly SMA near 183.25.
Meanwhile, the pattern of lower highs remains intact from the late August highs near 186.70.
In the daily candles, the Guppy is set to challenge the 100-day SMA currently parked near 180.00, and a bounce in the bullish momentum will have to remount the 186.00 level before extending further.
GBP/JPY daily chart
GBP/JPY technical levels
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
