UK May CPI holds at 2.8% YoY, below forecasts, fueling BoE rate hold expectations and GBP selling pressure.
The GBP/JPY pair fell below the 215.00 mark in early European trading after UK inflation data undershot expectations. Headline Consumer Price Index (CPI) remained at 2.8% YoY in May, unchanged from April, while core CPI rose to 2.6% from 2.5%, both missing consensus forecasts.
The softer-than-expected readings reinforced expectations that the Bank of England will maintain current interest rates, weakening the British Pound. Meanwhile, the Japanese Yen gained support from speculation of potential intervention and the Bank of Japan’s recent rate hike to its highest level since 1995.
Despite the JPY’s strength, Japan’s relatively low borrowing costs compared to the UK may limit further upside for the currency pair.