GBP/JPY sees 40-pips downward spike on poor UK CPI

Having peaked just shy of 159 handle in the last hour, the GBP/JPY pair met fresh supply and fell further to test 158.50 levels following the release of weaker-than expected UK inflation report.

GBP/JPY supported by risk-on

Currently, GBP/JPY rallies 1.08% to 158.70, quickly reversing a dip to 158.47, struck on the UK data release. The downbeat UK CPI-led sudden downslide met fresh demand near the mid-point of 158 handle, and the bulls staged a minor-rebound as persisting risk-on wave partially offset poor data-driven weakness in the cable.

The UK’s consumer prices rose 0.3% in April y/y against a 0.5% increase booked in March. Markets had predicted no growth in the prices in April. The core inflation rate, which excludes volatile food and fuel costs, dropped more than expected to 1.2% from a 1.5% rate in March. Markets had expected April core inflation at 1.4%.

Despite the drop in the UK’s consumer prices for the first time since September, the sentiment around the GBP remains buoyed, mainly on the back of rallying oil prices, which reinforces risk-on rally in the global equities.

Next of note for the major remains the US macro news, with the CPI figures closely watched for fresh hints on the Fed rate hike prospects.

GBP/JPY Levels to consider

The pair has an immediate resistance at 159 (round number), above which 159.50 (post-BOJ highs) would be tested. On the flip side, support is seen at 157.74 (50-DMA) below that at 157.14/07 (5 & 20-DMA).