The GBP/JPY cross rebounded from its earlier losses following the Bank of Japan’s (BoJ) interest rate decision on Wednesday. The pair traded around 196.20 during Asian hours, with the Japanese Yen (JPY) weakening despite the BoJ’s decision to raise its short-term rate target by 15 basis points (bps), from a range of 0%-0.1% to 0.15%-0.25%.
In addition to the rate hike, the BoJ announced a reduction in its Japanese government bond (JGB) purchases, cutting the monthly buying target to ¥3 trillion ($19.07 billion) from ¥6 trillion, effective from the first quarter of 2026. Market participants are now closely watching the BoJ’s press conference for further insights into Japan’s monetary policy direction.
On Tuesday, Japan’s Chief Cabinet Secretary Yoshimasa Hayashi confirmed that the BoJ and the government would coordinate closely to implement suitable monetary policies to achieve the inflation target.
In the UK, speculation is mounting that the Bank of England (BoE) may announce a rate cut in its upcoming decision on Thursday. This potential rate cut is exerting downward pressure on the Pound Sterling (GBP) and constraining the GBP/JPY cross’s gains. According to Reuters, there is nearly a 58% probability that the BoE will reduce borrowing costs by 25 bps to 5.0%.
Meanwhile, the US Federal Reserve (Fed) is anticipated to maintain its current interest rates during its July meeting, with a decision expected on Wednesday. However, expectations are building for a rate cut in September, which is weighing on the US Dollar (USD) and bolstering riskier currencies, including the British Pound.
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