Sterling Slides Versus Yen After BoE Holds Rates Steady

Written by Sandra Leggero

Sandra Leggero has a background in financial markets, having spent more than 9 years in commodities trading for several European and Asian companies. She holds a degree in Economics from the University of Pavia and specializes in emerging markets.

, | Updated: September 17, 2026

Key Moments

GBP/JPY was trading around 208.23, down 0.40%, after the Bank of England left its policy rate at 3.75% in a 6-3 vote.
Three BoE policymakers backed a 25-basis-point hike to 4.00% as the central bank highlighted upside inflation risks tied to higher energy prices.
The Japanese Yen strengthened ahead of the Bank of Japan’s decision, where a 25-basis-point rate increase was fully priced in, weighing further on GBP/JPY.

Sterling Under Pressure After BoE Policy Decision

GBP/JPY came under selling pressure on Thursday as broad-based weakness in the British Pound followed the Bank of England’s latest monetary policy announcement. At the time of writing, the cross was trading near 208.23, marking a decline of 0.40% on the session.

The Bank of England opted to keep its benchmark interest rate unchanged at 3.75% in a 6-3 decision, in line with market expectations. Chief Economist Huw Pill and external members Megan Greene and Catherine Mann dissented, backing a 25-basis-point increase to 4.00%.

BoE Flags Inflation Risks but Sees Limited Second-Round Effects

In its policy statement, the central bank cautioned that inflation risks are skewed to the upside, pointing specifically to higher energy prices associated with the war in the Middle East. The BoE reiterated that monetary policy is being calibrated to bring inflation back to the 2% target on a sustained basis as the economy continues to adjust to the energy shock.

At the same time, officials indicated that there has been limited evidence so far of pronounced second-round effects on domestic prices and wages. The Committee also highlighted that financial conditions have tightened since the onset of the conflict and have tightened further since July, pushing up borrowing costs for households and businesses. According to the BoE, these tighter conditions should help restrain inflationary pressures, although members differed on whether this tightening would persist without an additional increase in the Bank Rate.

Governor Andrew Bailey also kept the door open to further policy firming, stating, “If the conflict in the Middle East persists for an extended period, as appears to be the case, and the risk of second-round effects emerging increases, it is likely that policy may have to tighten.”

Market Reaction: Pound Fails to Capitalize on Hawkish Signals

Despite Bailey’s hawkish commentary, the Pound did not gain traction. The 6-3 voting pattern was unchanged from the previous meeting and did not deliver a significant surprise to market participants. In addition, indications of slack in the UK labor market were seen as a potential headwind to the case for additional rate hikes, curbing support for Sterling.

Yen Strength Ahead of BoJ Decision Adds to GBP/JPY Downside

Downward pressure on GBP/JPY was compounded by a stronger Japanese Yen. The JPY outperformed all major counterparts ahead of the Bank of Japan’s monetary policy decision scheduled for Friday. A 25-basis-point rate hike was fully reflected in pricing, shifting the market’s focus to any signals about a potentially quicker pace of tightening in the period ahead. More hawkish guidance from the BoJ would likely lend further support to the Yen and could push GBP/JPY lower.

Pound Performance Against Major Currencies

The following table shows the intraday percentage changes of the British Pound relative to other major currencies. According to the data, the Pound was strongest against the Canadian Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.11%	0.05%	-0.33%	0.08%	-0.35%	-0.49%	-0.14%
EUR	0.11%		0.16%	-0.20%	0.19%	-0.26%	-0.35%	-0.02%
GBP	-0.05%	-0.16%		-0.35%	0.03%	-0.41%	-0.51%	-0.16%
JPY	0.33%	0.20%	0.35%		0.35%	-0.03%	-0.19%	0.16%
CAD	-0.08%	-0.19%	-0.03%	-0.35%		-0.42%	-0.54%	-0.18%
AUD	0.35%	0.26%	0.41%	0.03%	0.42%		-0.10%	0.21%
NZD	0.49%	0.35%	0.51%	0.19%	0.54%	0.10%		0.39%
CHF	0.14%	0.02%	0.16%	-0.16%	0.18%	-0.21%	-0.39%

The heat map indicates the percentage change between each currency pair. The base currency is listed on the left, and the quote currency appears along the top. For instance, selecting the British Pound on the left and moving horizontally to the US Dollar cell shows the performance of GBP (base)/USD (quote).