The GBP/JPY currency pair is steadily moving towards a significant resistance level of 182.00 during the European trading session. The pair has gained momentum after surpassing yesterday’s peak of 181.45, as the initial impact of Bank of Japan (BoJ) Governor Kazuo Ueda’s potential adjustment to the ultra-dovish monetary policy diminishes.
Although domestic demand in Japan is contributing more to inflationary pressures, it still lags behind the impact of rising prices of imported goods. There are limited indications of a recovery in wages, and achieving a stable inflation target of 2% remains a distant goal.
As a result, the BoJ may continue its long-standing ultra-dovish interest rate policy this month to further enhance wage pressures.
On the other hand, the Pound Sterling has garnered attention from investors due to their belief that the Bank of England is planning additional interest rate hikes in order to bring inflation back to 2%. With discouraging employment reports, stable wage pressures, and weak manufacturing activities, investors are now focusing on Wednesday’s release of inflation data scheduled for 06:00 GMT.
In May, annual headline inflation in the UK rebounded to 8.7%, while the core Consumer Price Index (CPI), which excludes volatile oil and food prices, reached a new high of 7.1%. The primary factors driving significant inflation in the UK economy are labor shortages and notably higher food inflation.
The Brexit event and early retirements among UK individuals are solely responsible for the labor shortages. Furthermore, food price inflation in the British economy declined to 18.3% in May from its 45-year peak of 19.1%, suggesting that it has yet to reach its highest point.
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