The GBP/JPY currency pair has ended a five-day losing streak, trading around 191.90 during Thursday’s Asian session. With limited economic data scheduled for release in the United Kingdom (UK) this week, the British Pound (GBP) is expected to be influenced by market speculation about the Bank of England’s (BoE) interest rate decision in December.
In her speech on Monday at King’s Business School, BoE Deputy Governor Clare Lombardelli emphasized the need for more evident signs of easing inflation before the central bank considers further rate cuts. Lombardelli also raised concerns about inflation remaining above the BoE’s target, noting that wage growth was stabilizing at 3.5%-4.0%, and the Consumer Price Index (CPI) was still hovering around 3%, well above the 2% target. These factors could pose significant challenges to the BoE’s policy decisions.
While the GBP/JPY cross could receive some support, its upward momentum may face obstacles as the Japanese Yen (JPY) finds strength. Market expectations for a rate hike by the Bank of Japan (BoJ) are increasing, with the likelihood of a 25 basis point increase in December rising to 60%, up from about 50% a week ago. This shift in sentiment comes after BoJ Governor Kazuo Ueda hinted at potential tightening due to concerns over the Yen’s continued weakness. Investors are now focusing on Tokyo’s upcoming inflation data, which could provide crucial insight into the BoJ’s next policy moves.
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