UK inflation data misses expectations, reducing BoE rate hike bets, while faster BoJ tightening prospects lift the yen.
The GBP/JPY cross fell below 218.00 in early European trading on Wednesday, driven by mixed UK inflation data and rising expectations of faster Bank of Japan rate hikes. The yen gained support after reports suggested BoJ officials may accelerate tightening, alongside speculation of potential currency intervention by Japanese authorities.
UK headline CPI rose 2.6% year-over-year in June, below the expected 2.7% and down from 2.8% in May. Core CPI, excluding food and energy, climbed 2.6%, slightly above the 2.5% forecast. The data tempered expectations for a Bank of England rate hike, weighing on the pound.
Analysts noted easing pressures in food and petrol prices, alongside softer core services inflation, suggesting underlying inflation trends may be cooling. The yen’s strength, however, remained the primary driver of the GBP/JPY decline.