- GBP/JPY holds losses as the Japanese Yen advances, driven by stronger Tokyo’s core inflation.
- The JPY gained support amid increased safe-haven demand after the US appeals court issued a decision blocking Trump tariffs.
- The International Monetary Fund increased the UK GDP growth forecast for the current year to 1.2% from 1.1%.
GBP/JPY extends its losses for the second successive session, trading around 194.00 during the European hours on Friday. The Japanese Yen (JPY) appreciates against its peers, weighing on the currency cross, after Tokyo’s core inflation posted a stronger-than-expected data, reinforcing the odds of the Bank of Japan’s (BoJ) 25 basis point rate hike in July.
On Friday, the Tokyo Consumer Price Index (CPI) increased 3.4% year-over-year in May, slightly softer than the previous 3.5% rise. Meanwhile, Tokyo Core CPI excluding Fresh Food came in at 3.6% YoY, following a 3.4% increase in April. The index has surpassed median market forecasts for a 3.5% gain.
The JPY also received support from the safe-haven flows after the US Court of Appeals for the Federal Circuit in Washington, on Thursday, temporarily allowed Trump’s tariffs to take effect, holding a decision by a three-judge panel at the Court of International Trade in Manhattan.
On Wednesday, the federal court condemned Trump’s usage of the Carter-era International Emergency Economic Powers Act (IEEPA) to justify his international agenda, quoting it as exploitation of the president’s authority. The federal court found that Trump exceeded his authority in imposing broad import tariffs and declared the executive orders issued on April 2 unlawful.
The downside of the GBP/JPY cross could be restrained as the Pound Sterling (GBP) may receive support as the International Monetary Fund (IMF) raised the United Kingdom (UK) Gross Domestic Product (GDP) growth forecast for the current year to 1.2% from 1.1%.
The GBP also gains from the weakening of the probability of the Bank of England (BoE) reducing interest rates again in the June policy meeting. The hotter-than-expected UK Consumer Price Index (CPI) and a robust growth in the UK Retail Sales data for April weakened the dovish bets surrounding the Bank of England’s (BoE) policy outlook.
