GBP/JPY dips rapidly below 169.00 as UK CPI rises to 10.1%.

Oct 19, 2022

VOT Research Desk

The GBP/JPY pair has declined to near 168.54 as the UK Office for National Statistics has reported the headline Consumer Price Index (CPI) at 10.1%, higher than the expectations of 10% and the prior release of 9.9%.

Also, the core CPI has escalated to 6.5% than the projections of 6.4% and the former figure of 6.3%.A headline CPI has recaptured the double-digit figure again, the Bank of England (BOE) policymakers could sound extremely hawkish, going forward.

It is worth noting that the BOE escalated its interest rates by 50 basis points (bps) to 2.25% in its September monetary policy meeting. The BOE said on Tuesday that it will begin its delayed gilt selling operation on November 1st. The central bank cited financial instability as the reason for the delay in the operation. The action will cause the market’s liquidity to become more limited.

As UK ministers lose faith in the PM Liz Truss’ leadership style, political situations in the UK are getting ever more precarious. According to a YouGov survey of Tory members, 55% would now vote for Rishi Sunak, who lost to Ms. Truss, while just 25% would support Ms. Truss. Investors are staying away from the Tokyo market because of concern that the Bank of Japan (BOJ) would intervene in the currency markets to protect the yen from speculative FX swings.

In addition, authorities from Japan have mentioned the danger of deflation brought on by changes in global demand. Deflation would compel the BOJ to increase the amount of liquidity available to the economy.