GBP/JPY slides to 215.25 after BoJ's hawkish pause; downside seems limited

GBP/JPY retreats further from a multi-year top as the BoJ’s hawkish outlook boosts the JPY.
A 6-3 vote split and upward revision of inflation forecasts keep BoJ rate hike bets on the table.
Bets for two BoE rate hikes by late 2026 should support the GBP and limit losses for spot prices.

Haresh Menghani FXStreet

The GBP/JPY cross attracts some sellers during the Asian session on Tuesday and, for now, seems to have snapped a two-day winning streak to its highest level since January 2008, just above the 216.00 mark touched the previous day. Spot prices touch a fresh daily low, around the 215.25 region, amid a goodish pickup in demand for the Japanese Yen (JPY) following the Bank of Japan (BoJ) policy decision.

As was widely expected, the Japanese central bank left the short-term interest rate unadjusted at 0.75%. The JPY, however, gains strong positive traction in reaction to a hawkish vote split, with three board members voting for a rate hike. Furthermore, the BoJ delivered a significantly more hawkish inflation outlook amid elevated Crude Oil prices and acknowledged that the Iran war is clouding the economic growth trajectory.

Meanwhile, Japan's Finance Minister Satsuki Katayama said that Crude Oil volatility is feeding into FX markets and affecting the broader economy. Katayama also warned that authorities were ready to take decisive action against speculative activity, fueling intervention fears and underpinning the JPY. Moreover, a firmer US Dollar (USD) weighs on the British Pound (GBP), which contributes to the GBP/JPY pair's intraday slide.

Any meaningful GBP downfall, however, seems elusive in the wake of rising bets for two Bank of England (BoE) interest rate hikes by late 2026. Furthermore, investors remain worried that Japan's economy will come under substantial strains as the risk to energy supplies remains due to continued disruptions to shipping through the Strait of Hormuz. This, in turn, could support the GBP/JPY cross and help limit losses.

Economic Indicator

BoJ Press Conference

The Bank of Japan (BoJ) holds a press conference at the end of each one of its eight scheduled policy meetings. At the press conference the Governor of the BoJ communicates with media representatives and investors regarding monetary policy. The Governor talks about the factors that affect the most recent interest rate decision, the overall economic outlook, inflation, and clues regarding future monetary policy. Hawkish comments tend to boost the Japanese Yen (JPY), while a dovish message tends to weaken it.

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