The GBP/JPY currency pair settled below Friday’s high of 215.777, its strongest level since April 15th, as fresh UK retail sales data provided support to the Pound ahead of the Bank of England’s monetary policy announcement next week.
March retail sales, a gauge of consumer demand, rose 0.7% month-over-month, exceeding the 0.2% market estimate.
The BoE will likely not adjust interest rates due to ongoing upside risks to inflation in the context of Middle East situation.
Meanwhile, the Japanese Yen continued to underperform as investors focused on economic risks linked to escalating tensions in the Middle East.
Market participants remained doubtful about the durability of any agreement between the United States and Iran, citing the absence of progress in peace negotiations amid an American blockade of Iranian ports.
In a further escalation, Iran attacked three ships in the Strait of Hormuz on Wednesday and seized two of them. This development added to concerns that Japan’s economy could face significant strain from ongoing disruptions to energy flows through this key transit route.
Expectations that the Bank of Japan will leave interest rates unchanged at its upcoming April meeting, reinforced by the latest inflation print, have also undermined the Yen.
Japan’s headline CPI inflation rebounded from its lowest level in nearly four years, rising to 1.5% in March.
The core CPI measure, which excludes volatile fresh food prices, rose to 1.8% from 1.6% in February, though it stayed below the BoJ’s 2% target.
The minor Forex pair gained 0.57% for the week.
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