British Pound attracts bids against Japanese Yen after mixed UK CPI data

• The British Pound rebounds against the Japanese Yen from 218.20 after the UK CPI data release.
• The UK headline inflation cooled down at a faster-than-expected pace, with the core figure remaining steady, both at 2.6% YoY.
• Sheer weakness in the Japanese Yen has heightened hopes of Japan’s intervention.

The British Pound (GBP) witnesses slight buying interest against its major currency peers after the release of the United Kingdom (UK) Consumer Price Index (CPI) data for June. Against the Japanese Yen (JPY), the British currency rebounds strongly from the intraday low of 218.20.

The Office for National Statistics (ONS) has reported a slower-than-expected headline CPI growth. The headline inflation arrives at 2.6% Year-on-Year (YoY), lower than the estimates of 2.7% and the previous reading of 2.8%. On a monthly basis, the headline inflation rises at a moderate pace of 0.1%, as expected, against the previous reading of 0.2%.

However, the core CPI – which excludes volatile components such as food, energy, alcohol, and tobacco – grew steadily by 2.6% YoY, while it was expected to cool down to 2.5%.

Inflation in the service sector, which is closely tracked by Bank of England (BoE) officials, cooled down to 3.6% from 3.7% in May.

Slowing UK headline and services inflation growth is expected to ease fears of interest rate hikes by the BoE in the near-term.

Meanwhile, investors brace for more volatility in the British currency this week as the Retail Sales data for June and the preliminary S&P Global PMI data for July are lined up for release on Friday.

On the Tokyo front, investors expect Japan’s intervention in the forex market, following the decline in the Japanese Yen towards multi-decade lows against its major peers.

Earlier in the day, Japan’s Finance Minister (FM) Satsuki Katayama said that the authorities will take necessary steps on the foreign exchange if necessary. However, she declined to comment on specific forex levels.