GBP/JPY – Eases from highs after weaker UK inflation data

  • UK inflation unchanged in January
  • Markets expect BoE rate cut in Q2
  • GBPJPY pares gains after hitting 8.5 year high

UK inflation data this morning will have been a welcome surprise for the Bank of England but there’s still a long way to go.

Unfavorable base effects were expected to lift headline and core CPI last month but in both cases, they stayed at the same level. A small win but a win nonetheless for the BoE.

It was already expected to fall back to target in the second quarter before rebounding a little later in the year and this now increases the possibility of inflation undershooting the 2% target in the coming months and not rebounding as strongly.

While it’s tempting to get carried away with the release – as markets have repeatedly over the last year – the BoE will need more evidence the inflation is running lower than it assumed a couple of weeks ago before it considers cutting rates.

But based on today and if repeated in the coming months, a second-quarter cut is very possible.

An exhausted rally or temporary reprieve?

The pound fell sharply against the yen after the data and continues to trade near the day’s lows.


Source – OANDA

This occurred shortly after the pair hit an eight-and-a-half-year high above 190 on Tuesday, seeing resistance around the rising trend line. It initially did so with decent momentum but the inflation data may have changed that.

The first test below now becomes the November to January highs followed by the rising trendline from the early January lows. A break of these could be a very bearish development.

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at Visit to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

Former Craig

Former Craig

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.