GBP/JPY edges lower on Monday as the British Pound (GBP) weakens across the board following its recent advance, with traders trimming exposure ahead of the Bank of England’s (BoE) interest-rate decision on Thursday.
At the time of writing, the cross trades around 217.84, down 0.23% on the day
Sterling also faces pressure from lower UK government bond yields after Oil prices opened the week sharply lower. The temporary pause in attacks between the United States (US) and Iran has eased near-term inflation concerns, reducing expectations that the BoE will need to tighten policy aggressively. The BoE is widely expected to leave its benchmark interest rate unchanged at 3.75%.
The impact of the recent energy shock has so far been relatively contained in UK inflation data, with the Consumer Price Index (CPI) falling to a 15-month low of 2.6% in June. However, upside risks to inflation have not disappeared. The decline in Oil prices could prove short-lived in the absence of concrete negotiations between Washington and Tehran, while energy supplies through the Strait of Hormuz remain heavily disrupted.