GBP/JPY pares recent gains below 184.00 amid cautious mood, UK/Japan inflation clues eyed

• GBP/JPY snaps five-day uptrend as it takes offers to refresh intraday low after refreshing multi-year high the last week.
• Sour sentiment, fears of Japan intervention weigh on cross-currency pair.
• Hawkish hopes from BoE, upbeat yields prod GBP/JPY bears.
• Risk catalysts, UK/Japan inflation clues eyed for clear directions.

GBP/JPY takes offers to refresh the intraday low near 183.50 during the first loss-making day in six amid early Monday morning in Asia. In doing so, the cross-currency justifies the market’s sour mood amid a light calendar, as well as ignores the hawkish concerns about the Bank of England.

Concerns about the UK’s heating inflation and firmer Treasury bond yields previously fuelled the GBP/JPY prices toward the highest level since late 2008. That said, in the latest survey from the UK’s Chartered Institute of Personnel and Development (CIPD), human resources executives expected to increase basic pay rates by a median of 5% – unchanged from the previous two quarters and the joint-highest readings since the survey started in 2012. The CIPD poll also adds that the public sector pay expectations rose to the record high of 4.0% from 3.3%. The same escalates pressure on the Bank of England (BoE) to lift the rates amid heating inflation.

Previously, the UK economy unexpectedly grew in Q2, up 0.2%. UK GDP lifted 0.2% q/q in June, which, while low, was stronger than expectations of a flat outturn, and meaningful in the context of annual growth of just 0.4%. UK industrial production lifted 1.8% m/m in June, soundly beating expectations of just a 0.2% increase. Manufacturing output was up 2.4% m/m.

It’s worth noting that the Bank of Japan’s (BoJ) offers to buy Japan Government Bonds (JGBs) seem to check the GBP/JPY buyers of late.

Elsewhere, Russia’s firing of warning shots at a warship in the Black Sea joins the US-China trade/technology war to propel the yields and put a floor under the GBP/JPY prices.

Against this backdrop, S&P500 Futures remain dicey while the US Treasury bond yields edge higher amid Monday’s sluggish Asian session.

Moving on, this week’s UK employment, inflation and Retail Sales numbers will be crucial for the GBP/JPY traders to watch for clear directions amid the likely hawkish move of the BoE. Also important will be Japan's inflation clues and bond market moves.

Technical analysis

Although the overbought RSI line triggered the GBP/JPY pullback, the pair’s upside momentum remains accepted unless the quote provides a daily closing beneath a five-week-old rising support line, close to 182.90 by the press time.