Friday saw significant selling of GBP/JPY as the JPY strengthens following the BoJ's hawkish on-hold ruling.
The GBP's poor performance against a stronger JPY is also a result of the BoE's dovish stance.
For a new boost, traders now turn to BoJ Governor Ueda's remarks during the press conference.
Heavy selling occurs during Friday's session as the GBP/JPY cross continues the retracement decline from the 201.25 range, which is the highest level since July 2024. The downward trend, which is solely supported by a significant increase in demand for the Japanese yen (JPY), pushes spot prices to the lower end of the weekly range, or approximately 199.50.
At the end of a two-day monetary policy review meeting this Friday, the Bank of Japan (BoJ) made the expected decision to maintain the short-term interest rate goal in the range of 0.4% to 0.5%. Two people disagreed with the on-hold decision, though, and both of them wanted a rate hike. This gives the JPY a big intraday lift and puts downward pressure on the GBP/JPY cross.
In addition, given indications of economic resiliency, investors have been factoring in the potential for a 25 basis point (bps) BoJ rate hike in October. This represents a significant departure from the Bank of England's (BoE) dovish signal that the bank rate would continue to decline, which supports the JPY's superior performance over its British counterpart and influences the GBP/JPY cross.
However, because of worries that domestic political unpredictability may provide the BoJ with additional justifications to postpone rate hikes, the bulls of the Japanese yen may decide not to make aggressive bets. Furthermore, data released earlier today revealed that in August, Japan's core consumer prices increased at the weakest rate in nine months. Therefore, the comments made by BoJ Governor Kazuo Ueda ought to provide the GBP/JPY cross a new boost.
The GBP's poor performance against a stronger JPY is also a result of the BoE's dovish stance.
For a new boost, traders now turn to BoJ Governor Ueda's remarks during the press conference.
Heavy selling occurs during Friday's session as the GBP/JPY cross continues the retracement decline from the 201.25 range, which is the highest level since July 2024. The downward trend, which is solely supported by a significant increase in demand for the Japanese yen (JPY), pushes spot prices to the lower end of the weekly range, or approximately 199.50.
At the end of a two-day monetary policy review meeting this Friday, the Bank of Japan (BoJ) made the expected decision to maintain the short-term interest rate goal in the range of 0.4% to 0.5%. Two people disagreed with the on-hold decision, though, and both of them wanted a rate hike. This gives the JPY a big intraday lift and puts downward pressure on the GBP/JPY cross.
In addition, given indications of economic resiliency, investors have been factoring in the potential for a 25 basis point (bps) BoJ rate hike in October. This represents a significant departure from the Bank of England's (BoE) dovish signal that the bank rate would continue to decline, which supports the JPY's superior performance over its British counterpart and influences the GBP/JPY cross.
However, because of worries that domestic political unpredictability may provide the BoJ with additional justifications to postpone rate hikes, the bulls of the Japanese yen may decide not to make aggressive bets. Furthermore, data released earlier today revealed that in August, Japan's core consumer prices increased at the weakest rate in nine months. Therefore, the comments made by BoJ Governor Kazuo Ueda ought to provide the GBP/JPY cross a new boost.
