19 Dec 2024

GBP/JPY experienced an increase following the Bank of Japan's decision to maintain the short-term interest rate target within the range of 0.15% to 0.25%. The summary from the Bank of Japan indicates that there is considerable uncertainty regarding Japan's economic conditions and price forecasts. Meanwhile, the Pound Sterling has strengthened as market participants anticipate that the Bank of England will keep its interest rates steady at 4.75% during the upcoming meeting on Thursday.

GBP/JPY has ended its two-day decline, currently trading at approximately 195.50 during the Asian trading session on Thursday. The GBP/JPY pair is gaining value as the Japanese Yen (JPY) faces challenges following the announcement from the Bank of Japan (BoJ) regarding its decision to maintain interest rates.

The Bank of Japan has kept its policy rate unchanged for the third consecutive meeting, maintaining the short-term rate target within the range of 0.15%-0.25% after a two-day review of its monetary policy, which aligns with market expectations.

According to the Summary of the BoJ Policy Statement, inflation is anticipated to reach a level that is generally consistent with the BoJ's price target in the latter half of its three-year projection period, extending through fiscal 2026. Nevertheless, there remains considerable uncertainty regarding Japan's economic and price outlook. The influence of foreign exchange (FX) volatility on inflation may be more significant than in previous instances, attributed to shifts in corporate wage and price-setting practices.

The positive movement of the GBP/JPY cross is supported by the strengthened Pound Sterling (GBP), which may be linked to the heightened probability that the Bank of England (BoE) will maintain current interest rates later today, while continuing to prioritize the management of persistent domestic inflation.

Recent data released on Wednesday indicated that the UK Consumer Price Index (CPI) experienced a year-over-year increase of 2.6% in November, following a 2.3% rise in October. The Core CPI, which excludes the more volatile food and energy sectors, saw a YoY increase of 3.5% in November, up from a previous growth of 3.3%. Additionally, annual services inflation remained stable at 5%, slightly below the anticipated 5.1% but exceeding the BoE's forecast of 4.9%.