GBP/JPY slides to the 177.20 area following BoJ decision
- GBP/JPY cross remains under selling pressure and slides to the 177.20 area after the BoJ rate decision.
- Bank of Japan (BoJ) kept its short-term interest rates at -0.1%, 10-year JGB yield target around 0%.
- BoJ is closely watching the Federal Reserve's (Fed) and other central banks' policy decisions.
The GBP/JPY cross remains under selling pressure on Friday. The cross accelerates its bearish correction after retreating from the 181.50–177.00 region. GBP/JPY currently trades around 177.28, losing 0.64% for the day. The Japanese yen appreciated against its rivals following the central bank's interest rate decision.
The Bank of Japan maintained its ultra-low interest rates on Friday and decided to maintain its short-term interest rates at -0.1% while keeping its 10-year JGB yield target around 0%. Also, the central bank is allowed to make its yield curve control policy more flexible by moving 0.5% around the 0% target.
Earlier on Friday, Nikkei News reported that the BoJ will discuss tweaking its yield curve control policy to allow long-term interest rates to rise beyond the 0.5% ceiling. The Japanese Yen strengthened sharply against the Pound Sterling, and the 10-year Japanese government bond (JGB) yield rose to 0.519%.
BoJ Governor Kazuo Ueda reiterated that he would likely maintain ultra-loose policy to sustainably achieve the 2% inflation target. BoJ officials added that central banks prefer to examine more data before adjusting monetary policy.
Japanese Finance Minister Shunichi Suzuki also stated that the central bank is closely watching the Federal Reserve (Fed) and other central banks' policy decisions.
The latest report from the Statistics Bureau of Japan showed on Friday that July's headline Tokyo Consumer Price Index (CPI) rose to 3.2% YoY from 3.1% prior, against the market expectation of 2.8%. Meanwhile, the core Tokyo CPI, excluding Fresh Food and energy, improved to 4.0% from 3.8% previously. Furthermore, the Tokyo CPI ex-fresh food fell from 3.2% to 3.0% for the same month, against the market consensus of 2.9%.
On the other side, the Pound Sterling (GBP) weakens as worries of a recession in the UK economy might convince the BoE to aggressively tighten policy. The Bank's most aggressive rate hikes in three decades fuel concern about the impact on the UK’s economy, which exerts pressure on the Pound Sterling.
In the absence of top-tier economic data released from the United Kingdom, market participants will digest the data and statements from the BoJ. The JPY's valuation is likely to continue to influence the cross's movement in the next few sessions.
Author
Lallalit Srijandorn
FXStreet
Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.
