GBP/JPY trades with modest intraday losses, just above 183.00 ahead of UK CPI

• GBP/JPY meets with some supply on Wednesday, albeit lacks follow-through.
• Traders look to the UK CPI for some impetus ahead of the BoE on Thursday.
• Speculations about an imminent shift in the BoJ's dovish stance to cap gains.

The GBP/JPY cross attracts some sellers near the 50-day Simple Moving Average (SMA) during the Asian session on Wednesday and erodes a part of the previous day's positive move. Spot prices, however, manage to hold above the 183.00 mark as traders seem reluctant to place aggressive bets and prefer to wait for the latest UK consumer inflation figures.

The headline UK CPI is anticipated to have accelerated to 7.1% in August from 6.8% previous, while the core reading, which excludes seasonally volatile food and energy prices, is seen edging lower to 6.8% YoY rate from 6.9% in July. A surprisingly higher print will suggest that wage pressures are still feeding through into higher prices and keep the door open for further policy tightening by the Bank of England (BoE). This, in turn, should benefit the British Pound and provide a goodish lift to the GBP/JPY cross.

Any meaningful upside, however, seems limited in the wake of diminishing odds for more aggressive policy tightening by the BoE. In fact, BoE Governor Andrew Bailey had told lawmakers earlier this month that the central bank is now "much nearer" to ending its run of interest rate increases. Furthermore, reviving recession fears, along with signs that the UK labour market is cooling, might put pressure on the BoE to pause its rate-hiking cycle soon. Hence, the market focus will remain glued to the crucial BoE decision on Thursday.

The attention will then shift to the highly-anticipated Bank of Japan (BoJ) meeting on Friday amid speculations for an imminent shift in the central bank's dovish stance. BoJ Governor Kazuo Ueda, in an interview with Yomiuri newspaper, had said that ending negative interest rates is among the options available if the central bank becomes confident that prices and wages will keep going up sustainably. This, in turn, suggests that the BoJ could move away from ultra-loose policy and contribute to capping gains for the GBP/JPY cross.

Technical levels to watch