The GBP/JPY pair retraced slightly after reaching a one-week high near 199.55 during Thursday’s Asian session, with spot prices now hovering just above the 199.00 level. The lack of follow-through selling signals market hesitation, as traders await the Bank of England‘s (BoE) policy decision to determine the next directional move.
The BoE is widely expected to cut interest rates by 25 basis points for the second time this year, as it shifts its focus to the longer-term outlook of slowing inflation. However, much attention will be on the BoE’s forward guidance, particularly amid concerns that the UK’s expansive Autumn Budget, introduced by Chancellor Rachel Reeves, could exacerbate inflationary pressures. The final Monetary Policy Report for 2024, along with BoE Governor Andrew Bailey’s comments at the post-meeting press conference, will likely influence the British Pound (GBP) and shape the direction of the GBP/JPY cross.
Market Drivers: Japanese Authorities Weigh in as FX Volatility Grows
As traders await the BoE’s decision, verbal intervention from Japanese authorities is providing some support to the Japanese Yen (JPY), adding a headwind to the GBP/JPY pair. Japan’s Chief Cabinet Secretary Yoshimasa Hayashi emphasized the government’s heightened vigilance regarding currency movements, particularly speculative trading. Atsushi Mimura, Japan’s Vice Finance Minister for International Affairs, echoed these concerns, stating that the government stands ready to take action if necessary to curb excessive FX volatility.
Despite this intervention, doubts over the Bank of Japan‘s (BoJ) ability to further hike interest rates—coupled with ongoing political uncertainty in Japan—continue to weigh on the Yen. The prevailing risk-on sentiment in global markets is also undermining the JPY’s safe-haven appeal, offering further support to the GBP/JPY pair’s recent upward momentum.
Technical Outlook: GBP/JPY Eyes Further Gains, Needs Follow-Through
For the GBP/JPY pair, bulls will need to see follow-through buying beyond the 199.70-199.80 region, or a break above last week’s three-month high, to extend the recent move higher. With the BoE’s decision looming and Japan’s ongoing intervention in the currency market, traders are cautious but remain watchful for any new developments that could trigger a more definitive directional move.
Related Topics:
