The Japanese Yen (JPY) came under renewed pressure following the release of softer consumer inflation data for April, with the National core Consumer Price Index (CPI) decelerating to 1.4% year-over-year, the lowest since March 2022 and below the Bank of Japan's (BoJ) target for the third consecutive month [2]. Societe Generale analysts observed that USD/JPY rebounded after testing the multi-month channel floor near 155.50, now aligned with the 200-day moving average, and is advancing toward the April peak at 160.50/160.70, which is seen as a key interim resistance level [1]. Spot remains above the 50-day moving average, with support at 157.50 and resistance at 160.50, while significant option expiries are noted at 158.35-97 ($7.2bn) and 159.00-00 ($1.8bn) [1].
The GBP/JPY cross attracted dip-buyers and traded just above the mid-213.00s, close to a nearly two-week high, poised for strong weekly gains amid the broadly weaker Yen [2]. Despite disappointing UK macroeconomic data, including a 1.3% fall in Retail Sales for April and softer consumer inflation, the British Pound (GBP) remained resilient, with traders still pricing in the possibility of at least one Bank of England (BoE) rate hike by 2026 [2]. BoE Governor Andrew Bailey noted that a rise in market rates since the start of the Iran war has given the central bank more time to assess the economic impact of the conflict [2].
The weakening Yen is attributed to the softer CPI data, which may not deter the BoJ from hiking rates by 25 basis points in June, according to Societe Generale analysts [1]. Japan's PMI showed greater resilience compared to Europe, with the weaker Yen and accommodative interest rates potentially shielding the economy from larger shocks [1]. However, speculation persists that Japanese authorities might intervene to support the Yen, which could cap further gains in GBP/JPY [2].
A table of weekly percentage changes shows the Yen was the weakest against the British Pound, with GBP/JPY up 1.07% for the week [2]. The Yen's performance was also negative against most other major currencies, reflecting broad-based weakness [2].
CONCLUSION
The Japanese Yen's decline, driven by weaker-than-expected inflation data, has fueled speculation of a potential BoJ rate hike in June and pushed USD/JPY toward key resistance levels. The British Pound has capitalized on Yen weakness, with GBP/JPY nearing a two-week high despite lackluster UK data. Market sentiment remains cautious, with possible intervention by Japanese authorities and central bank policy decisions in focus.