GBP/JPY Retreats Amid BoE Rate Cut Speculation and Japanese Verbal Intervention
The GBP/JPY currency pair experienced a slight pullback in Thursday’s Asian session after reaching a one-week high of around 199.55. Currently trading near the 199.00 mark, the pair remains relatively stable as traders anticipate the Bank of England’s (BoE) upcoming policy decision. This pivotal event could determine the next directional movement for GBP/JPY.
The BoE is expected to adopt a long-term view on inflation trends, with analysts widely predicting a 25 basis point (bps) interest rate cut—its second this year. Traders will closely monitor the BoE’s forward guidance, especially considering the inflationary risks from the UK’s recently announced Autumn Budget by Chancellor Rachel Reeves. The Monetary Policy Report for 2024 and Governor Andrew Bailey’s press conference will play a critical role in setting the tone for the British Pound (GBP) in the forex market, potentially impacting the GBP/JPY cross.
Adding complexity to the pair’s outlook, Japanese authorities recently intensified their stance on foreign exchange intervention. On Wednesday, Japan’s Chief Cabinet Secretary Yoshimasa Hayashi highlighted the government’s increased scrutiny of FX market movements, particularly speculative activities. Meanwhile, Atsushi Mimura, Japan’s Vice Finance Minister for International Affairs, emphasized on Thursday that the government is prepared to intervene if excess volatility persists in the yen’s value.
Despite this supportive stance for the yen, uncertainty over the Bank of Japan’s (BoJ) future interest rate policies amid Japan’s political landscape continues to weigh on the safe-haven currency. Combined with a prevailing risk-on sentiment, this may limit the yen’s gains, supporting GBP/JPY’s recent upward trend. Traders may look for GBP/JPY to surpass the 199.70-199.80 resistance area or a three-month high before entering fresh positions, as a sustained break could signal an extended bullish phase.
