GBP/JPY falls below 165.00 as BOJ threatens action; UK Retail Sales are being monitored

During the Asian session, the GBP/JPY pair fell below the key support level of 165. After giving up the cushion of 166.00 on Wednesday, the asset is sliding sharply. The cross has established its auctioning area between 164.80 and 165.87, and the odds favor a break to the downside, which will pull it below 164.00.

The pound bulls have failed to profit on the headline UK inflation data's decline. The annual Consumer Price Index (CPI) came in at 9.9%, which was below both the forecast of 10.2% and the previous reading of 10.1%. In spite of rising energy costs, the economy is no longer experiencing double-digit inflation, despite the fact that the current inflation rate of 9.9 percent is still quite high. The core CPI, however, remained in line with expectations at 6.3%.

It would be premature to call an end to price pressures, given lower readings are not here to stay. The introduction of stimulus programs by the incoming Prime Minister of the United Kingdom, Liz Truss, to protect households from soaring energy costs and to reduce the size of tax rates will maintain rising inflationary pressures.

On Friday, the focus will be on the UK Retail Sales figures. The economic statistics is anticipated to show a 4.2% yearly decline, compared to the 3.4% recorded previously. In addition, the monthly figure will decrease by 0.5% compared to the 0.3% increase previously reported.

In the meantime, the yen bulls have received a shot of adrenaline as the Bank of Japan (BOJ) has threatened to intervene in the foreign exchange market to boost the home currency. Thursday, Nikkei reported that the BOJ conducted a foreign exchange "check" to determine how market players value the JPY. According to the news source, this is evidence that the BOJ may be preparing for a market intervention.