The GBP/JPY extends its fall while the operators prepare for the BOE rates decision

• The GBP/JPY falls almost 0.30% around 194.40, testing the 21 -day EMA support.
• The underlying inflation of the United Kingdom was reduced to 3.5% in May, while the general CPI was in line with expectations at 3.4%.
• The divergence of expanding policies generally favors the pound, but limits the short -term profits amid risk aversion.
• Japan National CPI that will be published on Friday could insinuate persistent inflation, possibly pushing the BOJ to harden slowly.

The sterling pound (GBP) extends its decline for the second consecutive day against the Japanese Yen (JPY) on Wednesday, since the cautious feeling dominates the market before the key verdict on the interest rate of the Bank of England (BOE) that will be published on Thursday. The Yen, as a safe refuge, finds modest support in the middle of an appetite for the contained risk, while the operators of the sterling pound remain reluctant to make aggressive bets until the address of the BOE policy is clarified.

The GBP/JPY moves down during US negotiation hours, falling almost 0.37% at the time of writing, since it goes back from the intra -dome peak of 195.35 to quote around 194.40. The pair is close to its 21 -day exponential (EMA) mobile average, which acts as a short -term pivot amid the cautious feeling of the market.

First thing, the new inflation data of the United Kingdom offered mixed signs for Libra operators. The annual underlying inflation rate was reduced to 3.5% in May, lowering the maximum of a year of 3.8% in April and slightly below the market forecasts of 3.6%. Meanwhile, the general annual inflation rate decreased to 3.4% from the previous 3.5%, fulfilling expectations. The softer underlying figure has fed the speculation that the Bank of England could adopt a more cautious tone in the short term, especially with broader price pressures showing signs of moderation.

In the face of Thursday’s BOE policy decision, the markets are firmly valuing a maintenance of the bank rate in 4.25%, with about 90% probability attributed to this result. It is likely that those responsible for the policy will issue a balanced message, recognizing the progress in the slowdown in inflation while they remain alert to the stiffness of the underlying prices. Monetary markets are currently valuing the first rate cuts as soon as in August, with another probable for the end of the year. However, any dovish inclination in future orientation could even weigh more about the short -term attractiveness of the pound against safe refuge counterparts such as Yen.

The broader policy divergence between the Bank of England and the Bank of Japan remains a key issue that supports GBP/JPY in the medium term. While the BOE maintains one of the highest policy rates among developed economies, the BOJ remains firmly accommodating, maintaining rates near zero and adopting a cautious posture about hardening. This performance gap generally supports the advantage of sterling pound. However, the demand for sure refuge for YEN and any more persistent Japanese inflation sign – with the Japan IPC that will be published on Friday – could limit the torque potential and keep the operators focused on new macroeconomic signals for the next movement.