GBP/JPY breaks below 193.00 ahead of BoE’s interest rate decision

GBP/JPY declines as the Japanese Yen strengthens, fueled by market expectations of a potential BoJ rate hike in 2025.
The UK ILO Unemployment Rate held steady at 4.4% for the three months ending January, as expected.
The BoE is expected to keep interest rates unchanged at 4.5% with a 7-2 vote split on Thursday.

Akhtar Faruqui FXStreet

GBP/JPY continues to slide for the second straight session, hovering around 192.80 during European trading hours on Thursday. The currency cross weakens as the Japanese Yen (JPY) gains traction, driven by market expectations of a potential Bank of Japan (BoJ) rate hike in 2025. On Wednesday, the BoJ kept its short-term interest rate target steady within the 0.40%-0.50% range.

The BoJ’s Monetary Policy Statement highlighted moderate economic recovery in Japan, despite some persistent weaknesses. Consumer spending is gradually improving, and inflation expectations are rising at a controlled pace. In a post-meeting press conference, BoJ Governor Kazuo Ueda reaffirmed that the central bank would adjust its policies to ensure the sustainable and stable achievement of its inflation targets.

Additionally, the GBP/JPY cross faces downward pressure as the Pound Sterling (GBP) weakens against major counterparts following the release of the UK labor market data. The Office for National Statistics (ONS) reported that the ILO Unemployment Rate remained at 4.4% for the three months ending January, in line with expectations and the previous reading.

UK Employment Change showed an increase of 144K new jobs during the same period, surpassing the 107K additions recorded in the three months ending December. Meanwhile, Average Earnings (excluding bonuses) rose by 5.9%, matching forecasts and previous figures.

Investors now turn their attention to the Bank of England’s (BoE) interest rate decision, expected later in the day. The BoE is widely anticipated to maintain rates at 4.5% with a 7-2 vote split. In its last policy meeting in February, the central bank lowered borrowing costs by 25 basis points.

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.

EUR/USD eases marginally, back to 1.1800

EUR/USD navigates a narrow range on Thursday, hovering around the 1.1800 neighbourhood in a context of humble gains in the US Dollar. The pair’s lacklustre performance come amid the unabated trade uncertainty, geopolitical tensions in the Middle East and the cautious tone from the ECB’s Lagarde.

GBP/USD retreats from tops, approaching 1.3540

GBP/USD partially sets aside Wednesday’s strong advance and recedes to the 1.3540 region on Thursday. Cable’s modest retracement follows the equally acceptable gains in the Greenback, while investors continue to pencil in a potential BoE rate cut in March.

Gold clings to gains just below $5,200, focus on geopolitics

Gold is edging modestly higher on Thursday, adding to Wednesday’s uptick and holding just below the $5,200 mark per troy ounce against the backdrop of modest gains in the US Dollar. In the meantime, attention is turning to the geopolitical scenario following US-Iran nuclear talks.