British Pound dips hold above 216.50 Japanese Yen following mixed UK data

• GBP/JPY finds support at the 216.50 area after rejection at 217.00.
• UK PMIs showed a mild improvement in business activity, although Retail Sales contracted in July.
• In Japan, the hotter National CPI figures have failed to provide any significant impulse to the Yen.

British Pound's (GBP) rally against the Japanese Yen (JPY) was capped at the 217.00 area earlier on Friday, and the pair pulled back to the 216.50 area where it found some support. The moderately positive UK business activity data offset the downbeat Retail Sales figures released earlier on the day and provided a mild impulse to the GBP.

Preliminary UK S&P Global Purchasing Managers Index (PMI) data for July revealed that the UK services sector’s activity accelerated to 52.8 from 52.1 in June, against expectations of a slight decline to  51.8. The Manufacturing PMI, on the other hand, slowed down to 51.5, from 51.9, in line with market expectations, while the Composite PMI ticked up to 52.5 from 52.2 in June, also beating forecasts of a decline to 51.6.

Before that, National Statistics figures revealed that UK retail consumption contracted 0.5% in July, meeting the market's consensus, and following a  0.7% increase in June. Year-over-year, sales increased at a 1.6% pace, down from 3.8% in June and below the consensus 2.2%.

Japan's inflation fails to ease Yen's weakness

In Japan, data released earlier on the day showed that the national Consumer Price Index (CPI) accelerated to a 1.9% year-on-year (Y-o-Y) rate in July, its highest level since December, from a downwardly revised 1.6% in June. Likewise, the core CPI rose to a 1.8% yearly rate from 1.6% in the previous month.

These figures add pressure on the Bank of Japan (BoJ) to hike interest rates in September, but the impact on the Yen has been muted. Investors are increasingly sceptical about the BoJ’s ability to accelerate its tightening path, after Japan’s preliminary Gross Domestic Product (GDP) figures, released earlier in the week, revealed that economic growth slowed down against expectations in the second quarter.