GBP/JPY remains firm below the 193.00 barrier following UK CPI data

• GBP/JPY holds positive ground near 192.80 after the downbeat UK February inflation data. 
• The UK CPI rose 3.4% YoY in February vs. 3.6% estimated. 
• The dovish hike from the BoJ weighs on the JPY against the GBP. 
• The BoE interest rate decision on Thursday will be a closely watched events 

The GBP/JPY cross remains firm below the 193.00 barrier during the early European trading hours on Wednesday. The downbeat UK Consumer Price Index (CPI) inflation data for February did not impact the Pound Sterling (GBP) against the Japanese Yen (JPY). Investors will closely monitor the Bank of England's (BoE) monetary policy meeting on Thursday for fresh catalysts, with no change in rate expected. At the press time, GBP/JPY is trading at 192.80, gaining 0.47% on the day. 

The latest data from the UK Office for National Statistics on Wednesday reported that the nation’s Consumer Price Index (CPI) for February rose 0.6% MoM from a 0.6% fall in the previous month, below the market consensus of a 0.7% increase. On an annual basis, the CPI figure increased 3.4% YoY, easing from a 4.0% rise in January and worse than the market expectation of a 3.6% increase. 

This report will influence the BoE on whether the central bank will signal its first interest rate cut or retain its “higher rate for longer” stance. Meanwhile, the BoE is anticipated to keep interest rates unchanged at 5.25% for the fifth successive meeting on Thursday as inflation is cooling down. 

The BoE governor Andrew Bailey said after the February meeting that the UK central bank saw good news on inflation over the past few months, but policymakers need to see more evidence that inflation is on the course to the 2 % target before BoE can lower interest rates.

On Tuesday, the Bank of Japan (BoJ) decided to raise the interest rate by 10 basis points (bps) from -0.1% to 0% for the first time since 2007, as widely anticipated. However, the Japanese policymakers did not provide any guidance about future policy trajectory and stated that financial conditions would remain accommodative for the time being. The uncertainty of the pace of the BoJ's policy normalization exerts some selling pressure on the JPY and acts as a tailwind for the GBP/JPY cross. 

Looking ahead, the Japanese Merchandise Trade Balance Total for February and Jibun Bank Manufacturing PMI for March will be due on Thursday. Market players will shift their attention to the BoE interest rate decision later on Thursday. These events could give a clear direction to the GBP/JPY cross.