GBP/JPY holds steady above 200.00 as traders keenly await BoE rate decision

The GBP/JPY cross struggles to capitalize on the previous day's goodish rebound from the 199.50-199.45 area, or a four-day low, and oscillates in a range during the Asian session on Thursday. Spot prices manage to hold above the 200.00 psychological mark as traders keenly await the key central bank events for some meaningful impetus and to determine the next leg of a directional move.

The Bank of England (BoE) will announce its policy decision later today and is largely anticipated to keep the benchmark interest rate unchanged at 4% amid concerns about still sticky inflation. The Office for National Statistics (ONS) reported on Wednesday that the headline UK Consumer Price Index (CPI) rose at the same pace seen in the previous month, by 3.8% over the year in August, or the highest level since January 2024. However, signs of a cooling labour market keep the door open for further policy easing by the UK central bank, which is seen acting as a headwind for the British Pound (GBP) and capping the GBP/JPY cross.

The Japanese Yen (JPY), on the other hand, is undermined by the weaker-than-expected release of Core Machinery Orders data from Japan. Moreover, concerns that domestic political turmoil could give the Bank of Japan (BoJ) more reasons to delay raising interest rates, along with the underlying bullish sentiment, undermine the safe-haven JPY and act as a tailwind for the GBP/JPY cross. Investors, however, seem convinced that the BoJ will stick to its policy normalization path. This marks a big divergence in comparison to a relatively dovish BoE outlook and should keep a lid on any further appreciating move for spot prices.

Traders might also refrain from placing aggressive bets and opt to wait for the BoJ monetary policy update on Friday. Despite the mixed fundamental backdrop, the lack of any meaningful selling suggests that the path of least resistance for the cross is to the upside. Bulls, however, might wait for sustained strength and acceptance above the 200.40 horizontal barrier before positioning for any further gains. The GBP/JPY cross might then surpass the 200.75 region, or the highest level since July 2024 touched earlier this week, and could possibly extend the momentum further beyond the 201.00 round-figure mark.