The GBP/JPY pair struggles to build on yesterday’s modest recovery of approximately 75-80 pips from the 179.80 zone, marking the weekly low. As the Asian session unfolds on Thursday, fresh selling pressure emerges.

The current spot prices remain in negative territory for the fourth consecutive day, hovering around the 180.30-180.35 range, experiencing a slight decline of less than 0.20% on the day.

The British Pound (GBP) continues to exhibit relative underperformance following the release of softer UK consumer inflation data on Wednesday. The weaker inflation figures ease pressure on the Bank of England (BoE) to adopt a more aggressive interest rate hike stance.

Concurrently, concerns about China’s slowing economic growth, worsening US-China relations, and geopolitical tensions are bolstering the demand for the safe-haven Japanese Yen (JPY), consequently weighing on the GBP/JPY cross.

Earlier data released this week indicated a substantial deceleration in China’s economic growth during the second quarter, along with a sharp slowdown in retail sales in June. Additionally, China’s ambassador to Washington expressed the country’s desire to avoid trade or tech wars, but he also warned of potential responses if the US imposes further restrictions on imports of advanced chip-making equipment.

Adding to the prevailing concerns, Russia’s defense ministry announced that any ships bound for Ukraine’s Black Sea ports would be considered potential carriers of military cargo, exacerbating regional tensions. This situation is dampening recent market optimism and prompting investors to seek the safety of the Japanese Yen.

However, gains for the JPY might be capped by dovish remarks made by Bank of Japan (BoJ) Governor Kazuo Ueda. During a news conference following the G20 meeting in India, Ueda pushed back against speculations of a BoJ policy shift, signaling a commitment to maintaining an ultra-loose monetary policy for the foreseeable future.

He also highlighted that the 2% inflation target remains some distance away from sustainable achievement, indicating continuity in the BoJ’s monetary policy narrative.

On the other hand, the annualized UK CPI continues to surpass the BoE’s 2% target, supporting the case for further policy tightening. Despite this, cautious market participants prefer to wait for a more pronounced selling pressure on the GBP/JPY cross before anticipating the continuation of the recent corrective pullback from the 184.00 level, which was the highest point reached earlier this month.


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