GBP/JPY Gains as Traders Await BoE Policy Call

Key Moments

GBP/JPY Extends Rally Toward Multi-Year Highs

The British Pound recovered early losses and gained against a weak Japanese Yen in London trade on Thursday. Buyers pushed GBP/JPY above 214.00, moving the pair toward a five-day winning streak and closing in on the 16-year high at 215.00.

However, traders remain cautious as they await the Bank of England’s monetary policy announcement later today. This event could determine the Pound’s next directional move.

BoE Decision in Focus: Rates Likely on Hold

Markets widely expect the Bank of England to keep its benchmark rate at 3.75%. Inflation remains high, and economic growth shows signs of improvement. Analysts will watch the Monetary Policy Committee’s vote closely, as two members may call for a 0.25 percentage point rate cut.

If fewer than two members dissent, markets may interpret the outcome as hawkish, which could support the Pound against major currencies.

Political Uncertainty Weighs on Yen

The Japanese Yen stays under pressure ahead of snap elections next weekend. Investors fear Prime Minister Takaichi could secure stronger parliamentary backing, allowing her to expand fiscal policies further and raise the already high budget deficit.

Polls earlier this week suggested the Liberal Democratic Party (LDP) could win up to 300 of 450 lower house seats. Such a result would represent a landslide, remove the need for a coalition, and pose the market’s most concerning scenario.

JGB Auction Offers Limited Support

Thursday’s 30-year Japanese Government Bond (JGB) auction drew stronger-than-usual demand. This eased yield pressures slightly, with the 30-year yield dropping to 3.5% from 3.65%.

The 20-year JGB yield also fell to 3.13% from 3.20% before the auction. Despite this easing, broader concerns over fiscal policy and elections continue to weigh on the Yen.

Bank of England Indicators to Watch

Investors focus on upcoming BoE announcements regarding interest rates and the MPC vote. These releases could influence GBP price action significantly.