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GBP Spikes on Inflation Jump

GBP has soared into pole position across the G10 FX space over the European morning on Wednesday. The latest UK inflation data released today highlighted an unexpected uptick in consumer prices last month which has fed into hawkish expectations ahead of the BOE tomorrow. Prior to the data, traders had adopted a more dovish outlook on the meeting. However, with prices seen jumping back up to 10.4% last month, up from 10.1% prior, there is a reaffirmed case for continued tightening from the BOE which is driving GBP higher here.
 

JPY Down on Weaker Safe-Haven Demand

In contrast, JPY has fallen sharply today as better risk sentiment is fuelling a weakening of safe-haven demand for the Yen. Calmer market conditions on the back of recent measures taken to help prevent a widespread banking crisis have fuelled a reversal of themes. JPY looks likely to remain weaker while the current trends continue. Retail traders are holding a large 65% short position in the pair, suggesting plenty of room for further upside near-term.
 

Technical Views

GBPJPY

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The rally off the 159.98 level has seen the market break out above the 162.22 level. Price is now testing the bear channel top and with momentum studies bullish, the focus is on a breakout towards the 164.43 level next while 162.22 holds as support.

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