GBP/JPY rises above 198.00 as traders expect BoE to deliver a nominal rate cut in November

GBP/JPY may appreciate further as the BoE is highly expected to deliver a 25 basis points rate cut on Thursday.
The Office for Budget Responsibility revised its 2025 inflation forecast to 2.6% from March's 1.5% estimate.
BoJ Meeting Minutes indicated that board members largely agreed to continue to raise interest rates.

Akhtar Faruqui FXStreet

GBP/JPY extends its gains for the second successive session, trading around 198.30 during the European hours on Wednesday. However, the upside potential for the GBP/JPY cross seems possible as the Bank of England (BoE) is projected to lower interest rates by only 25 basis points on Thursday.

Investor expectations now point to fewer rate cuts in 2024 compared to projections made before last week’s budget announcement. The Office for Budget Responsibility recently revised its 2025 inflation forecast, increasing it to an average of 2.6% from March's 1.5% estimate. This update aligns closely with the BoE’s August forecast, which projects inflation at 2.4% in one year, 1.7% in two years, and 1.5% in three years.

Investors will closely monitor BoE Governor Andrew Bailey's press conference for insights into how the FY2025 budget might influence inflation expectations and shape monetary policy decisions in December.

The downside for the Japanese Yen (JPY) is expected to be limited, influenced by the hawkish tone in the minutes from the Bank of Japan’s (BoJ) recent meeting. The minutes showed broad agreement among board members to continue raising interest rates, as inflation and economic conditions appear to support the central bank's policy objectives.

The Jibun Bank Japan Services Business Activity Index fell to 49.7 in October, down from 53.1 in September, signaling a decline in services activity. This marks the first contraction since June, although it was marginal, with companies reporting slower sales.

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.

AUD/USD eyes 0.7150 barrier nine-day EMA

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