GBP/JPY finds interim support above 190.00 as BoE opposes early rate cuts

• GBP/JPY gauges an intermediate cushion near 190.40 as the BoE sees no rush for rate cuts.
• UK’s high wage growth and service inflation keep the inflation outlook stubborn.
• Japan’s National CPI remains higher at 2% than expectations.

The GBP/JPY pair discovers a temporary cushion near 190.40 in Wednesday’s European session. The asset remains broadly upbeat as the Bank of England (BoE) is not ready for imminent rate cuts due to a stubborn inflation outlook.

BoE policymakers want to see more evidence to gain confidence that inflation will sustainably return to the 2% target to begin reducing interest rates.

On Tuesday, BoE Deputy Governor Dave Ramsden, who voted for holding interest rates at 5.25% in the last monetary policy meeting, said he wants to see how long inflation will remain persistent. Ramsden added the duration of inflation remaining persistent will determine how long interest rates will be maintained at 5.25%.

This week, the British Retail Consortium (BRC) reported that the annual shop price inflation retreated to 2.5% in February, the lowest since March 2022, which seems to offer some relief to households. However, strong wage growth and high service inflation continue to keep the outlook of consumer price inflation sticky.

The United Kingdom’s economic calendar is light this week. Therefore, the Pound Sterling will be guided by market expectations for rate cuts by the BoE.

Meanwhile, the Japanese Yen finds some buying interest as Japan’s inflation remains more stubborn than expectations in January. The annual National Consumer Price Index (CPI) rises by 2.0% against expectations of 1.8% but decelerates from December’s reading of 2.3%.