GBP/JPY Exchange Rate Softens Following BoJ Rate Decision
The Pound Sterling to Japanese Yen (GBP/JPY) exchange rate was placed on the defensive today, falling during the Asian session in the wake of the Bank of Japan’s (BoJ) rate decision.
At the time of writing, the GBP/JPY exchange rate has slipped roughly 0.3% so far today, leaving the pairing trading at around ¥144.24.
Japanese Yen (JPY) Strengthens as BoJ Offers Rate Timetable
The Japanese Yen (JPY) is accelerating against the Pound (GBP) and the majority of its other peers this morning, following the Bank of Japan’s (BoJ) latest rate decision.
It came as no surprise to see the BoJ leave interest rates on hold at -0.1% again this month as the bank maintains it ultra-low monetary policy in an effort to stimulate domestic inflation, which is currently stuck at 0.5%, well below its 2% target.
However the BoJ did surprise markets by offering, for the first time, a timetable for how long it will keep rates on hold as it sought to provide more specific policy guidance to investors.
The BoJ’s policy statement read:
‘The BOJ intends to maintain the current extremely low levels of short-term and long-term interest rates for an extended period of time, at least through around spring 2020.’
While this of course could be subject to change, especially as inflation looks unlikely to enter the BoJ’s target range until at least 2021, some JPY investors speculated today’s announcement could indicate that the bank will tighten its monetary policy regardless, something that appeared to lend support to the Yen this morning.
Pound (GBP) Left in Brexit Limbo
Meanwhile, the Pound (GBP) finds itself struggling to find momentum today as lack of concrete Brexit developments limits appetite for the UK currency.
This comes as cross-party talks appeared to have stalled, with neither the Conservatives nor Labour showing any signs of budging, and hopes of a deal being reached growing slimmer by the day.
Add to this the rising uncertainty surrounding Theresa May’s future leadership and it’s easy to see why investors remain cautious regarding the Pound.
GBP/JPY Exchange Rate Forecast: Sterling to Struggle as BoE Holds Steady?
Looking ahead, amidst a lull in notable data this week, movement in the Pound Japanese Yen (GBP/JPY) exchange rate is likely to remain limited until the Bank of England’s (BoE) policy meeting next week.
Unfortunately for GBP investors the bank is unlikely to drop any policy bombshells and is widely expected to commit to leaving rates on hold until Brexit is resolved. It will furthermore likely leave rates on hold until at least 2020, seeing as the Brexit deadline was delayed until the end of October.
However we could still see the BoE still offer a lifeline to Sterling next week if, in line of the UK’s recent economic data, it offers a more sanguine outlook for UK growth in 2019.
In the meantime, movement in the Yen is likely to be dependent on risk-sentiment, with JPY exchange rates potentially slipping if progress in US-China trade talks lead market risk appetite to rally.