• GBP/JPY moves back closer to a nearly two-week top as a weaker JPY counters negative factors.
• Japan’s softer National CPI and economic risks due to the Middle East conflict undermine the JPY.
• The GBP seems rather unaffected by weak Retail Sales figures and the UK political uncertainty.

The GBP/JPY cross attracts some dip-buyers on Friday and sticks to modest intraday gains through the first half of the European session. Spot prices currently trade just above mid-213.00s, close to a nearly two-week high set on Thursday, and seem poised to register strong weekly gains amid a broadly weaker Japanese Yen (JPY).

Against the backdrop of economic risks stemming from the Middle East conflict and disruptions to energy supplies through the critical Strait of Hormuz, Japan's softer consumer inflation figures released earlier today undermine the JPY. In fact, the National core Consumer Price Index (CPI), which excludes fresh food, decelerated from 1.8% in the previous month to the 1.4% YoY pace in April. This marked the lowest level since March 2022 and remained below the Bank of Japan's (BoJ) target for the third straight month.

The British Pound (GBP), on the other hand, seems unaffected by disappointing UK macro data, mixed signals over the Bank of England's (BoE) outlook, and the UK political uncertainty. The UK Office for National Statistics (ONS) reported that Retail Sales fell 1.3% in April, compared to a revised 0.6% in March and expectations of a 0.6% decline. This comes on top of softer UK consumer inflation figures and an unexpected rise in the UK Unemployment Rate, though it does little to temper BoE rate hike bets.

In fact, traders are still pricing in the possibility of at least one interest rate hike by the BoE in 2026. However,  BoE Governor Andrew Bailey said on Wednesday that a rise in market rates since the start of the Iran war has given the central bank more time to assess the ​economic impact of the conflict. The GBP bulls also seem hesitant amid serious leadership challenges to UK Prime Minister Keir Starmer. This, along with speculations that Japanese authorities might step in to support the JPY, might cap the GBP/JPY cross.