The GBP/JPY cross continued its downward trajectory on Thursday, marking a second consecutive day of losses as it retreated further from a three-month peak around the 199.80 level reached the previous day. Spot prices fell below the 198.00 mark following the Bank of Japan‘s (BoJ) policy announcement during the Asian session, although the pair remains within a familiar range established earlier this week.
As widely expected, the BoJ opted to keep its monetary policy settings unchanged, citing political uncertainty stemming from Sunday’s snap elections in Japan. In its accompanying statement, the BoJ reaffirmed its commitment to raise policy rates if economic conditions and inflation align with forecasts. This stance, combined with concerns about potential government intervention and increased caution ahead of the November 5 US presidential election, has driven safe-haven flows into the Japanese Yen (JPY), placing additional pressure on the GBP/JPY cross.
Conversely, the British Pound (GBP) faced downward pressure from renewed US Dollar (USD) dip-buying, further dragging spot prices lower. However, skepticism regarding the BoJ’s ability to implement further interest rate hikes, along with diminishing expectations for aggressive cuts by the Bank of England (BoE), could provide some support for the GBP/JPY cross. This scenario may warrant caution among bearish traders before confirming that the pair has peaked in the near term.
Market participants are now turning their attention to the post-meeting press conference, where comments from BoJ Governor Kazuo Ueda could influence the JPY and provide further impetus for the GBP/JPY cross, particularly in the absence of significant macroeconomic releases from the UK on Thursday.
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