In the early European session on Friday, GBP/JPY is trading in negative territory near 197.75 for the sixth consecutive day. The Japanese Yen is gaining strength as traders prepare for the Bank of Japan’s upcoming monetary policy meeting, where a rate hike is a possibility. On the other hand, the Bank of England is expected to cut its interest rate by 25 bps next week.
Recent data from Japan’s Statistics Bureau showed that Tokyo core CPI inflation increased by 2.2% YoY in July, supporting the case for a BoJ rate hike. The market is now pricing in a 38% probability of a 15 bps increase. Additionally, fears of FX intervention by Japanese authorities are further boosting the Yen.
On the GBP side, expectations of a rate cut by the BoE are weighing on the currency. Analysts predict a 25 bps cut in August, followed by another cut in November, bringing the rate down to 4.75% by 2024.
Analysis:
The GBP/JPY pair is facing downward pressure as the possibility of a BoJ rate hike and BoE rate cut looms. Investors should monitor these central bank decisions closely as they can impact currency values and exchange rates. A BoJ rate hike would strengthen the JPY, while a BoE rate cut would weaken the GBP. Understanding these factors can help individuals make informed decisions regarding their investments and financial strategies.