GBP/JPY remains depressed below mid-167.00s, hangs near weekly low post-UK CPI

• GBP/JPY remains under some selling pressure for the second successive day on Wednesday.
• Softer UK consumer inflation figures undermine the British Pound and act as a headwind.
• A positive risk tone dents the JPY’s relative safe-haven status and lends support to the cross.

The GBP/JPY cross edges lower for the second straight day on Wednesday and retreats further from over a one-month high, around the 169.25 area touched the previous day. The cross remains depressed below the mid-167.00s through the early European session and drifts back closer to the weekly low in reaction to softer UK consumer inflation figures.

The British Pound weakens a bit after the UK Office for National Statistics (ONS) reported that the headline CPI decelerated from the 2% rise reported in the previous month and rose 0.4% MoM in November. 
Furthermore, the yearly rate eased from 11.1% in October to 10.7% during the reported month. Meanwhile, the core inflation gauge, which excludes volatile food and energy items, come in at a 6.3% YoY rate in November as compared to 6.5% in October and anticipated. The data, however, does little to alter market expectations for a 50 bps rate hike by the Bank of England on Thursday and helps limit the downside for the GBP/JPY cross.

The Japanese Yen, on the other hand, struggles to gain any meaningful traction and fails to provide any impetus to the GBP/JPY cross. A generally positive risk tone, bolstered by the optimism over the easing of COVID-19 curbs in China and firming expectations for a less aggressive policy tightening by the Fed, seems to act as a headwind for the safe-haven JPY. This, in turn, supports prospects for the emergence of some dip-buying around the cross, warranting some caution for aggressive bearish traders. Hence, it will be prudent to wait for a sustained weakness below the 167.00 mark before positioning for any further depreciating move.

Technical levels to watch