Key Moments
- GBP/JPY rebounded from around 212.00 on Wednesday and traded just below the mid-213.00s, up about 0.20% intraday.
- Market participants have priced in a near-certain 25-basis-point Bank of England rate hike on Thursday, supporting the Pound.
- Intervention risks and a softer US Dollar lent some support to the Yen, tempering additional upside in GBP/JPY.
Sterling-Yen Rally Extends Ahead of BoE Decision
The GBP/JPY pair attracted fresh buying interest on Wednesday, reversing an earlier decline toward the 212.00 area and advancing to a new two-month high during the first half of the European session. The cross was last seen trading just below the mid-213.00s, showing a gain of around 0.20% on the day, and it appears set to extend an uptrend that has been in place for about a week.
BoE Expectations and Fiscal Backdrop Bolster the Pound
The British Pound is drawing support from increasing conviction that the Bank of England will lean more hawkish as policymakers confront the risk of stubborn inflation. Market pricing reflects a near-certain 25-basis-point rate increase at the BoE’s meeting on Thursday. In addition, receding fiscal concerns following recent UK budget updates are lending further backing to the Pound, providing a supportive backdrop for the GBP/JPY cross.
Yen Under Pressure, But Intervention Risk Limits Losses
The Japanese Yen continues to lag the Pound amid uncertainty surrounding the timing of the Bank of Japan’s next rate hike. That said, speculation that Japanese authorities may intervene to support the currency is helping to curb deeper Yen weakness. Japan’s Finance Minister Satsuki Katayama reiterated on Monday that the government is prepared to act to curb excessive or disorderly weakness in the JPY.
Softer Dollar Aids Yen, Caps GBP/JPY Upside
A broadly weaker US Dollar is another factor working in favor of the Yen, which in turn may restrain further gains in GBP/JPY. At the same time, many traders appear reluctant to initiate large directional positions and instead are adopting a more cautious stance ahead of the crucial BoE policy announcement on Thursday. Even so, the overall fundamental configuration still points to an upside-biased outlook for the cross in the near term.
Pound Performance Against Major Currencies This Week
The following table summarizes the percentage change of the British Pound against major currencies this week. According to this snapshot, the Pound has been strongest versus the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | — | -0.82% | -0.71% | 0.43% | -0.10% | 0.38% | 0.08% | -0.95% |
| EUR | 0.82% | — | 0.08% | 1.21% | 0.69% | 1.12% | 0.90% | -0.16% |
| GBP | 0.71% | -0.08% | — | 0.96% | 0.59% | 1.04% | 0.80% | -0.23% |
| JPY | -0.43% | -1.21% | -0.96% | — | -0.51% | -0.06% | -0.42% | -1.47% |
| CAD | 0.10% | -0.69% | -0.59% | 0.51% | — | 0.47% | 0.09% | -0.85% |
| AUD | -0.38% | -1.12% | -1.04% | 0.06% | -0.47% | — | -0.24% | -1.26% |
| NZD | -0.08% | -0.90% | -0.80% | 0.42% | -0.09% | 0.24% | — | -1.09% |
| CHF | 0.95% | 0.16% | 0.23% | 1.47% | 0.85% | 1.26% | 1.09% | — |
The heat map represents percentage moves of major currencies relative to each other. The base currency is taken from the left-hand column, and the quote currency from the top row. For instance, selecting the British Pound from the left column and following the row to the US Dollar cell gives the percentage change for GBP (base)/USD (quote).
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