The GBP/JPY cross is trading in positive territory for the fourth consecutive day, hovering near 188.65 during early European trading on Thursday. The pair is buoyed by the weakening Japanese Yen (JPY), while market participants remain cautious ahead of the Bank of England (BoE) and Bank of Japan (BoJ) policy decisions.
BoE Rate Decision in Focus
The BoE is expected to hold its key interest rate at 5.0% during its September meeting, as the UK’s Consumer Price Index (CPI) inflation remained at 2.2% in August, above the BoE’s 2% target. Rob Wood, Chief UK Economist at Pantheon Macroeconomics, noted that the latest inflation data provides the BoE “little reason to rush to cut interest rates again” on Thursday.
Financial markets are largely pricing in that the BoE will delay any further rate cuts until November. However, any surprise move from the BoE to cut rates earlier than expected could trigger a sharp decline in the Pound Sterling (GBP), impacting the GBP/JPY pair negatively.
BoJ Meeting and Economic Data in Focus
On Friday, attention will shift to the BoJ’s monetary policy meeting, where the central bank is expected to maintain its target range for short-term interest rates at 0% to 1%. Rina Oshimo, a senior strategist at Okasan Securities Co., indicated that the focus will likely be on Governor Kazuo Ueda’s remarks following the policy announcement. Market participants will be keen to gauge any signals regarding the BoJ’s future policy direction, especially in light of Japan’s upcoming National Consumer Price Index (CPI) data, which could provide further clues on the central bank’s stance.
Outlook for GBP/JPY
The GBP/JPY pair’s near-term direction will be heavily influenced by the outcomes of the BoE and BoJ meetings. A hawkish tone from the BoE or dovish signals from the BoJ could propel the pair higher. Conversely, any unexpected rate cut from the BoE or a more hawkish stance from the BoJ could trigger a reversal in the GBP/JPY’s current uptrend.
Traders should keep a close watch on the central banks’ announcements and subsequent comments, as they will be key drivers of market sentiment and volatility in the GBP/JPY pair in the days ahead.
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