GBP/JPY rose to a daily high near 186.20, displaying nearly 0.70% gains.
GBP traded strongly against most of its rivals following hot inflation figures from the UK in July.
The extreme dovish position of the BoJ leaves the JPY vulnerable.
In Wednesday's session, the GBP/JPY advanced to new cycle highs, near 186.20, mainly driven by the GBP’s strengths. The UK revealed higher-than-expected Consumer Price Index Figures from July, which boosted hawkish bets on the Bank of England (BoE) and British yields making the Pound gain interest. On the other hand, the Bank of Japan (BoJ) divergences against its peers, making the JPY weaker.
Investors digest UK’s CPI and now foresee an additional 75 bps of tightening
The British Consumer Price Index (CPI) declined to 6.8% YoY in July, as expected from its previous 7.9%. In addition, the Core CPI slightly accelerated to 6.9% YoY in the same month, above the expected 6.8% from its previous 6.9%. The Bank of England (BoE) tightening expectations continue to rise as a reaction. Instead of discounting a 5.75% at the start of the week, investors foresee a terminal rate of 6%, meaning an additional 75 basis points (bps) of tightening for this cycle. In that sense, the GBP got a boost and traded strongly against most of its rivals
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