GBP/JPY surges above the 185.00 mark following UK CPI data

• GBP/JPY breaks above the 185.00 barrier, gaining 0.04% on the day following the UK inflation data.
• UK CPI rose 6.8% YoY in July vs. 6.8% expected; monthly CPI figure declined 0.4% in July vs. -0.5% expected.
• Traders turn cautious amid the fear of FX intervention by the Bank of Japan (BoJ).
• Market players will shift their focus to UK Retail Sales for July.

The GBP/JPY cross gains traction and edges higher to the 185.00 area heading into the early European session on Wednesday. The positive UK inflation data is supporting the cross's momentum. Meanwhile, the possible FX intervention by the Japanese central bank remains in focus.

The latest data by the UK’s National Statistics reported that the nation's Consumer Price Index (CPI) MoM came in at -0.4%, above the market consensus of -0.5% versus the previous reading of 0.1%. On a yearly basis, British CPI inflation rose 6.8% for June, as expected of 6.8%. The core CPI, which excludes volatile oil and food prices for July, increased 6.9%, better than the 6.8% estimation. Meanwhile, the UK Retail Price Index (RPI) for July came in at -0.6% MoM and 9.0% YoY.

On the other hand, the economic data on Tuesday showed that Japan’s economic growth came in at 1.5% QoQ, versus 0.8% expected and 0.7% previously. On a yearly basis, the GDP increased to 6.0%, compared to 3.1% estimated and 2.7% previously.

That said, the monetary policy differential between the US and Japan is the main driver of the Yen's weakening. However, the possible additional rate hike by the Bank of England (BoE) might boost the Pound Strerling and act as a tailwind for the GBP/JPY cross.

However, traders turn cautious amid the fear of FX intervention by the BoJ. Finance Minister Shunichi Suzuki stated on Tuesday that rapid movements are "undesirable" and the government is "ready to respond appropriately," while emphasising that no particular levels are intended for intervention, per Reuters.

Moving on, market players will shift their focus to UK Retail Sales for July. The monthly figure is expected to drop 0.5%. Also, the Japanese Trade data and the annual National Consumer Price Index for July will be released from the Japanese docket later this week.