GBP/JPY extends gains around 181.40, focus on UK, Japan data

• GBP/JPY continues the losing streak on market caution regarding the BoE interest rate trajectory.
• Japan’s Trade Balance increased to ¥62.4B surplus from negative ¥937.8B previously.
• UK revealed a resilient headline CPI at 6.7%, defying expectations of a decrease to 6.6%.

GBP/JPY extends losses in the third trading session, trading lower around 181.40 during the European session on Thursday. The pair receives downward pressure on Japan’s Merchandise Trade Balance Total, showing a positive balance of ¥62.4B for September. The data was expected to report a negative figure of ¥425B, which was negative ¥937.8B in the previous readings.

Additionally, the uncertain direction of the Bank of England's (BoE) upcoming policy decisions is perceived as a significant factor creating headwinds for the GBP/JPY pair.

Recent UK consumer inflation data, disclosed on Wednesday, revealed a resilient headline CPI at 6.7% in September, defying expectations of a slight decrease to 6.6%. This result has sparked speculation about a potential BoE rate hike in November.

Additionally, earlier this week, the UK Office for National Statistics (ONS) reported a minor slowdown in wage growth for the three months leading up to August. This occurrence might offer the BoE an opportunity to maintain interest rates at their current level.

The Bank of Japan (BoJ) has upgraded its assessment for six out of nine economic regions in a recent quarterly report, indicating a moderate recovery for Japan's economy overall. However, the report highlights that exports and output in many regions remain relatively stagnant.

This week, Japan's top financial diplomat, Masato Kanda, noted that the Japanese Yen (JPY) continues to be viewed as a safe-haven asset, benefiting from safe-haven flows due to geopolitical tensions in the Middle East. Kanda asserted that if the currency market experiences excessive fluctuations, authorities are prepared to take measures such as raising interest rates or intervening in the market, potentially supporting the Japanese Yen.

Investors are eagerly awaiting Friday's Japanese inflation data for potential market direction. The National Consumer Price Index (CPI) excluding fresh food is anticipated to show a year-on-year rise of 2.7%, down from the previous reading of 3.1%.

UK Retail Sales will also be eyed by the investors, which is expected to decline in September.