The GBP/JPY currency pair pulled back from recent high of 211.59, its strongest level since August 2008, as investors weighed central bank policy outlook.
Market participants see limited scope for aggressive monetary policy easing by the Bank of England in 2026.
Earlier this month, the BoE reiterated that policy settings will follow a gradual downward trajectory rather than a sharp easing move.
The BoE reduced its benchmark interest rate by 25 basis points to 3.75% at its December meeting, while four MPC members favored keeping the rate unchanged at 4.00%.
The central bank said the scale of any additional rate reductions would depend on how the inflation outlook develops. Inflation in the UK has remained above the BoE’s 2% target, even after moderating in recent months. Annual inflation has slowed to 3.2% in November from a 3.8% peak during the July–September period.
the Bank of Japan’s December Summary of Opinions added to expectations of continued policy tightening in 2026.
At its December meeting, the BoJ lifted its policy rate to 0.75% from 0.50%. The Summary of Opinions, released Monday, showed some board members saw room for additional rate hikes soon, which provided certain support to the Yen and weighed on the GBP/JPY pair.
The Summary also revealed that a weaker Yen and higher long-term yields were partly due to the BoJ’s policy rate being low relative to inflation. Therefore, markets now expect the central bank to continue normalizing policy.
The GBP/JPY currency pair was last down 0.12% on the day to trade at 210.98.
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