GBP/JPY Corrects Lower as British Yields Weigh on Pound's Appeal

After experiencing five consecutive days of gains, the GBP/JPY finally underwent a downward correction, resulting in a loss of over 0.50% for the day. This correction was primarily driven by declining British yields, which diminished the attractiveness of the British pound. Despite this correction, the Japanese Yen remains vulnerable due to Kazuo Ueda's dovish stance, as he expresses concerns about inflation falling below the Bank of Japan's target. Market focus is now on the upcoming inflation data from Japan, scheduled to be released during the early Friday Asian session.

Meanwhile, British bond yields are declining, indicating that investors hold a negative outlook on the UK's economy and are displaying a higher demand for bonds. Specifically, the 2-year, 5-year, and 10-year yields have experienced declines of more than 1%, reaching levels of 5.13%, 4.55%, and 4.30%, respectively.

In contrast, Kazuo Ueda continues to express a dovish perspective, emphasizing that underlying inflation remains below the targeted level. He also suggests that a potential policy adjustment would be considered once inflationary pressures align with the Bank of Japan's forecasts. In this context, the upcoming inflation figures, particularly the Tokyo Consumer Price Index (CPI) for June, will significantly impact the dynamics of the JPY price. Currently, investors anticipate an acceleration of the headline figure to 3.8% year-on-year and the Core measure to 4.4%.

From a technical standpoint, the GBP/JPY is still within a strong bullish trend, and the price appears to be contained within a bullish channel. Presently, it is retesting the support area around 182.000. In our view, there is a possibility for the price to continue its upward movement towards 185.000.