During Monday’s Asian session, the GBP/JPY pair staged a recovery, edging lower towards the 195.00 level. The Japanese Yen (JPY) displayed notable intraday strength, potentially influenced by unconfirmed reports of Japanese authorities intervening to bolster the domestic currency, as highlighted by Reuters. It’s pertinent to note that Japanese markets remained closed on Monday in observance of Showa Day.
The Bank of Japan (BoJ) opted to maintain its existing policy settings unchanged in its decision announced last Friday. Initially, this decision exerted downward pressure on the JPY. However, the prevailing optimistic market sentiment, coupled with diminishing safe-haven appeal for the JPY, contributed to the support for the GBP/JPY cross. Furthermore, expectations of a prolonged and substantial interest rate differential between Japan and other nations suggest a predisposition for further depreciation in the trajectory of the Japanese Yen.
Conversely, in the UK, the Pound Sterling (GBP) demonstrated strength amid market speculations that the Bank of England (BoE) may defer any decision to lower borrowing costs until the next quarter, in line with median forecasts from a Reuters poll.
Reuters reported remarks from Bank of England Chief Economist Huw Pill last week, indicating that interest rate cuts are not imminent. Additionally, persistent inflationary pressures and robust domestic Purchasing Managers Index (PMI) figures have pushed back expectations for the timing of the first BoE rate cut.
