Ella 
During early European trading on Friday, GBP/JPY fell to around 197.75. The Japanese yen (JPY) edged higher as traders likely unwound carry trades ahead of next week’s Bank of Japan (BoJ) monetary policy meeting.
Data released by the Statistics Bureau of Japan on Friday showed that the Tokyo Consumer Price Index (CPI) increased by 2.2% year-on-year in July, compared with an increase of 2.3% in June. Meanwhile, Tokyo’s consumer price index excluding fresh food rose 2.2% in July from 2.1% previously, in line with market consensus. It was the third consecutive month of gains, following a 1.6% annual decline in April.
Japan’s CPI inflation report in Tokyo supported a rate hike by the Bank of Japan next week, boosting the yen against the pound. Financial markets currently see a 38% chance of a 15 basis point (bps) interest rate hike.
Additionally, concerns about further intervention by Japanese authorities in foreign exchange (FX) are likely to continue to support the yen and be negative for EUR/JPY. Earlier on Friday, Japan’s top currency diplomat Masato Kanda said excessive foreign exchange fluctuations could have a negative impact on Japan’s economy, adding that he would closely monitor the economy and take necessary measures if necessary.
On the pound front, growing expectations that the Bank of England (BOE) will cut interest rates at its upcoming policy meeting on August 1 have weighed on the currency. Analysts at UBS expect the Bank of England to cut interest rates by 25 basis points in early August, followed by another 25 basis points in November, taking rates to 4.75% by the end of 2024.
