• GBP/JPY remains under heavy selling pressure for the second successive day on Wednesday.
• Jawboning by Japanese authorities points to an imminent intervention and boosts the JPY.
• Softer UK consumer inflation data fails to impress the GBP bulls or lend support to the cross.

The GBP/JPY cross extends the overnight retracement slide from a nearly three-month high and continues losing ground for the second successive day on Wednesday. The selling bias remains unabated following the release of softer UK consumer inflation data and drags spot prices to the 165.15 area, back closer to the weekly low during the early European session.

The UK Office for National Statistics reported that the headline CPI rose 0.5% in August against 0.6% anticipated and the yearly rate unexpectedly decelerated to 9.9% from 10.1% in July. Additional details revealed that the core inflation gauge (excluding volatile food and energy items) edged higher to a 6.3% YoY rate versus 6.2% in July, matching estimates. The data did little to provide any meaningful impetus to the British pound or lend any support to the GBP/JPY cross. The intraday slide remains exclusively driven by a strong pickup in demand for the Japanese yen.

The spillover effect of the overnight slump in the US equity markets continues to offer some support to the safe-haven JPY, which gets an additional boost from jawboning by Japanese authorities. This comes amid speculations that the Bank of Japan may soon step in to arrest a freefall in the JPY and continues to exert downward pressure on the GBP/JPY cross. That said, a big divergence in the monetary policy stance adopted by the BoJ and other major central banks should cap gains for the JPY, which, in turn, should lend some support to the cross, at least for now.

Technical levels to watch