The data released by the UK Office for National Statistics on Wednesday showed that the consumer price index (CPI) in March increased by 2.6% year-on-year, lower than the previous value of 2.8% and also lower than the market expectation of 2.7%. This is the weakest inflation performance since December 2024, indicating that price pressures are easing.

At the same time, the core CPI excluding food and energy prices increased by 3.4% year-on-year, consistent with market expectations, but still indicating that core inflation is at a relatively high level.

According to market research, the decline in inflation has strengthened market expectations that the Bank of England will remain inactive or cut interest rates within 2025, putting short-term pressure on the pound.

Affected by this, GBP/JPY fell 0.31% in early European trading on Wednesday, reaching 188.80, hitting a intraday low.

From the analysis of the daily chart, GBP/JPY continues to operate below the 100 day moving average (EMA), indicating a bearish mid-term trend. The relative strength index (RSI) for the 14th is currently around 44, below the 50 median line, indicating that selling forces still dominate the market.

The important support below is 187.50. If it breaks further, the target may point to 184.37 (the low point on September 13, 2024). If it breaks through the 190.00 level, it is expected to test 194.19 (the high point on April 3)

Technical indicators combined with weak fundamentals suggest that GBP/JPY may still retrace to the 186.00 range in the short term, unless prices return above 190 and stabilize—— CMC Markets forex strategist James Dowling

Against the backdrop of a market dominated by risk aversion, the Japanese yen has remained strong. The recent US tariff policies have raised concerns in the market about a global economic slowdown, coupled with improvements in Japan's own fundamentals, such as a 4.3% monthly increase in core machinery orders in February, providing support for the Japanese yen.

In addition, the expectation that the Bank of Japan may continue to raise interest rates in 2025 contrasts sharply with the path of the Federal Reserve's interest rate cuts, making the yen more attractive.

Editor's viewpoint:

The pound yen exchange rate is currently under dual pressure: on the one hand, the decline in UK inflation has weakened market expectations for the Bank of England to tighten its policies; On the other hand, the risk aversion sentiment and the recovery of Japanese economic data have enhanced the attractiveness of the yen.

In terms of technical form, GBP/JPY has not yet escaped the downward channel. If it cannot stabilize above the 190 level in the short term, it is not ruled out that the exchange rate may continue to fall back to the 186 or even 184 region.