GBP/JPY rebounds as BoE decision looms; BoJ minutes hint at gradual tightening

The British Pound (GBP) rebounds against the Japanese Yen (JPY) on Wednesday, recovering from a sharp sell-off the previous day that followed UK Chancellor Rachel Reeves’ pre-budget speech. The announcement sparked heavy selling in Sterling, pushing GBP/JPY to nearly one-month lows on Tuesday. At the time of writing, the cross is trading around 200.60, staging a mild recovery from the intraday low of 199.07.

The British Pound also draws some support from the latest UK Purchasing Managers Index (PMI) data. The Services PMI rose to 52.3 in October, beating the flash estimate of 51.1 and the previous month’s 50.8, marking the sixth consecutive month of expansion and signaling a moderate rebound in service-sector activity. Meanwhile, the Composite PMI, which combines services and manufacturing output, climbed to 52.2 from 50.1 in September, the strongest reading since May.

Attention now turns to the Bank of England (BoE) interest rate decision due on Thursday. Markets broadly expect the BoE to hold the Bank Rate at 4.00%, though a minority of analysts still see room for a 25-basis-point (bps) cut. With inflation running above the 2% target and wage pressures proving persistent, policymakers are likely to retain a cautious tone.

In Japan, the Bank of Japan (BoJ) released the minutes of its latest Monetary Policy Meeting earlier on Wednesday, following last week’s decision to hold interest rates at 0.50%. The minutes showed that most policymakers agreed that current real interest rates remain very low, reinforcing the view that the BoJ will likely continue raising rates gradually if its economic and price projections materialize.

Members noted that risks to economic growth remain skewed to the downside for fiscal 2026, while a few members highlighted that underlying inflation is gradually accelerating toward, but has not yet reached, the 2% target.