GBP/JPY closed with losses amid BoJ intervention rumours, eyes on UK CPI

• The GBP/JPY traded in the 179.93 - 182.09 range, setting a second consecutive day of losses.
• BoJ intervention prospects help the Yen gain traction.
• Eyes on inflation data from the UK on Wednesday, ahead of BoE's decision.

On Tuesday, the GBP/JPY pair suffered losses as the Yen gained traction on the back of Bank of Japan rumours to intervene in the market to bolster the domestic currency. On the other hand, investors await UK’s inflation data at the early London trading hour’s ahead of the Bank of England’s (BoE) decision on Thursday.

Japanese government to intervene in the markets to stop the Yen’s decline

According to a Reuters poll, most economists anticipate that Japan's government and the BoJ will intervene if the Japanese Yen weakens and reaches 145 per U.S. Dollar. Market participants will closely watch for any hints of intervention in the June BoJ meeting minutes, scheduled for release early on Wednesday in the Asian session.

On the other hand, The UK National Statistics Office is set to release the May CPI figures on Wednesday. Expectations suggest a slight deceleration, with the headline figure anticipated at 8.5% compared to the previous 8.7%. Additionally, a 0.4% monthly increase is expected for May. The Core figure is projected to remain unchanged at a year-on-year rate of 6.8%.

For Thursday’s BoE’s decision, a 25 basis point (bps) rate hike is already priced in, so inflation data may strengthen or weaken the case for a larger increase of 50 bps. In addition, eyes will be on Governer Andrew Bailey’s presser, where market participants will look for clues regarding the next monetary policy decision. As for now, investors anticipate 25 bps hikes in August, September, November, and December. These hikes would potentially bring the policy rate to a peak of around 5.75%.

GBP/JPY Levels to watch

The GBP/JPY currently exhibits a neutral to bearish bias in the short term. Although the bulls have lost some momentum, technical indicators continue to show positive signals, implying the potential for further upward movement in the market.

If GBP/JPY manages to regain momentum, the next resistances to watch are at the 181.00 area, followed by the 181.50 zone and the cycle high at 182.12. On the other hand, in case the cross loses more ground, support levels line up at the nearest round levels at the 180.50 area and below the psychological mark at 180.00 and the 179.50 zone.

GBP/JPY Daily chart