GBP/JPY appreciates to near 195.50 after BoJ policy, focus shifts to BoE decision

GBP/JPY rose after the BoJ decided to keep the short-term rate target unchanged within the range of 0.15%-0.25%.
BoJ Summary suggests that uncertainty surrounding Japan's economic and price outlook remains significant.
The Pound Sterling appreciates as traders expect the BoE to maintain its current interest rates at 4.75% on Thursday.

Akhtar Faruqui FXStreet

GBP/JPY has halted its two-day losing streak, trading around 195.50 during the Asian session on Thursday. The GBP/JPY cross is appreciating as the Japanese Yen (JPY) struggles after the release of the Bank of Japan's (BoJ) decision to keep interest rates unchanged.

The Bank of Japan maintained its policy rate for the third consecutive meeting, keeping the short-term rate target within the range of 0.15%-0.25% after its two-day monetary policy review, in line with market expectations.

The Summary of the BoJ Policy Statement stated that Inflation is expected to reach a level broadly consistent with the BoJ's price target in the latter half of its three-year projection period, extending through fiscal 2026. However, uncertainty surrounding Japan's economic and price outlook remains significant. The impact of foreign exchange (FX) volatility on inflation could be more pronounced than in the past, owing to changes in corporate wage and price-setting behaviors.

The upside of the GBP/JPY cross is bolstered by the improved Pound Sterling (GBP), which could be attributed to the increased likelihood of the Bank of England (BoE) keeping interest rates unchanged later in the day while remaining focused on addressing elevated domestic inflation.

Data showed on Wednesday that the UK Consumer Price Index (CPI) rose by 2.6% year-over-year in November following 2.3% growth in October. Core CPI, excluding volatile food and energy items, increased 3.5% YoY in November, compared to a previous rise of 3.3%. Meanwhile, the annual services inflation steadied at 5%, below forecasts of 5.1% but above the BoE's estimate of 4.9%.

Economic Indicator

BoE Interest Rate Decision

The Bank of England (BoE) announces its interest rate decision at the end of its eight scheduled meetings per year. If the BoE is hawkish about the inflationary outlook of the economy and raises interest rates it is usually bullish for the Pound Sterling (GBP). Likewise, if the BoE adopts a dovish view on the UK economy and keeps interest rates unchanged, or cuts them, it is seen as bearish for GBP.

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