GBP/JPY holds onto gains near 198.00, BoJ warns of global trade uncertainty

GBP/JPY holds gains near 198.00 as the BoE’s hawkish interest rate cut is keeping the Pound Sterling on the front foot.
The BoE cut interest rates to 4%, and maintained a “gradual and careful” policy easing approach.
BoJ officials are highly concerned about global trade uncertainty.

Sagar Dua FXStreet

The GBP/JPY pair clings to gains after a three-day winning streak around 198.00 during the late Asian trading session on Friday. The cross remains broadly firm as a hawkish interest rate cut by the Bank of England (BoE) has pushed the Pound Sterling on the front foot.

On Thursday, the BoE reduced interest rates by 25 basis points (bps) to 4%, as expected, with a narrow majority. Economists had anticipated seven out of nine members of the Monetary Policy Committee (MPC) will support lowering interest rates, however, only five voted a reduction.

The BoE maintained a “gradual and careful” monetary expansion stance for the remainder of the year and raised one-year forward Consumer Price Index (CPI) projections to 2.7% from 2.4%.

Going forward, investors will focus on the labor market data for three-months ending June, which is scheduled to be released on Tuesday. The employment data will significantly influence market expectations for the BoE’s monetary policy outlook. Lately, labor market-related indicators have signaled weakness in demand for fresh workers as employers have slowed hiring to offset the increase in employers’ contributions to social security schemes.

Meanwhile, the Japanese Yen (JPY) trades cautiously as the Bank of Japan (BoJ) Summary of Opinions report for the July monetary policy stated has stated that officials were mixed about the interest rate outlook amid global trade uncertainty. Officials also warned that price pressures could stall before re-accelerating despite the United States (US)-Japan trade agreement.

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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