GBP/JPY rebounds from 181.00 as BoE prepares for consecutive fat rate hike

• GBP/JPY has delivered a recovery move from 181.00 as BoE is expected to announce a bigger rate hike ahead.
• UK’s core inflation is expected to remain steady and might keep a strict burden on households.
• Former BoJ Kameda forecasted that the central bank won’t do any tweaks in the interest rate policy.

The GBP/JPY has found support after a soft corrective move to near 181.15 in the Tokyo session. The cross has sensed some buying interest as investors are hoping that the Bank of England (BoE) will announce a consecutive fat rate hike in its monetary policy meeting in August.

BoE Governor Andrew Bailey raised interest rates by 50 basis points (bps) to 5% in June while investors were anticipating a small interest rate hike of 25 bps. A surprise jump in May’s headline Consumer Price Index (CPI) and fresh highs in core inflation at 7.1% were sufficient to force the central bank to go for a big rate hike.

Going forward, investors will get more cues after the release of June’s inflation report, which is scheduled for Wednesday at 06.00 GMT. As per the consensus, monthly headline CPI reported a pace of 0.4% lower than the prior pace of 0.7%. While annualized inflation is expected to decelerate to 8.2% against the former release of 8.7%. Core inflation is expected to remain steady at 7.1%.

Knowing the fact that core CPI would remain elevated, the BoE will continue to hike interest rates further. Meanwhile, households in the United Kingdom economy are facing the burden of higher interest rates. UK’s property website cited that prices asked for housing have dropped straight for the second month. The overall demand for the property sector has dropped as investors are avoiding higher interest rate obligations.

On the Japanese Yen front, investors are awaiting the interest rate decision by the Bank of Japan (BoJ), which will be announced next week. BoJ’s former top economist, Seisaku Kameda, forecasted that the central bank won’t do any tweaks in the interest rate policy. He further added the central bank will keep forecasts for FY2024 and 2025 roughly unchanged.