Pound Japanese Yen (GBP/JPY) Exchange Rate Soars After BoE Interest Rate Decision

(Updated 16:35 03/02/22)

The Pound Japanese Yen (GBP/JPY) has skyrocketed today as the Pound (GBP) has found itself boosted following the Bank of England’s (BoE) decision to raise interest rates to 0.5%. The currency pair is currently at its highest point since November 2021.

At time of writing the GBP/JPY exchange rate is at around ¥156.3400, which is up roguhly 0.8% from this morning’s opening figures.

Pound Japanese Yen (GBP/JPY) Exchange Rate Climbs as BoE Rate Hike Looms

The Pound Japanese Yen (GBP/JPY) exchange rate has continued to climb today as the Pound (GBP) firms ahead of an expected rate hike announcement from the Bank of England (BoE).

At time of writing the GBP/JPY exchange rate is at around ¥155.5900, roughly 0.3% from this morning’s opening figures.

Pound (GBP) Muted as Investors Await BoE Interest Rate Decision

The Pound (GBP) has remained largely subdued against its major rivals today, as traders likely hold off on making any significant bets ahead of the Bank of England’s interest rate decision.

The central bank is expected to announce an interest rate hike of 0.25% on Thursday in order to curb soaring inflation. Inflation hit its highest point in December since March 1992 and the UK’s labour market has continued to tighten. A rate hike could see the Pound boosted against its competitors.

The move by the BoE will be the first back-to-back increase undertaken since 2004 with the central bank also set to begin a programme of quantitative tightening.

Investec chief economist Philp Shaw is predicting an unanimous 9-0 vote by the Monetary Policy Committee to raise rates:

‘Members are likely to disregard what looks set to be a temporary bump in the path of the economic recovery around the turn of the year due to the spread of the Omicron variant.’

UK ministers will be hoping that action taken by the BoE will also help limit the ongoing cost of living squeeze affecting many across the country.

Energy group Ofgem are expected to announce a 50% jump in energy prices today, with Chancellor Rishi Sunak expected to announce measures in order to aid the hardest hit families.

The Pound could continue to see domestic headwinds however, with three more MPs publicly announcing that they have submitted letters of no confidence in PM Boris Johnson amid the ‘partygate’ scandal.

Japanese Yen (JPY) Dips amid Five-Month Low for Services Sector

The Japanese Yen (JPY) has dipped today as a resurgent US Dollar (USD) has seen investors instead flock to the safe-haven ‘Greenback’.

The Yen may have also have been pulled down today by poor performance in the country’s services sector, as activity contracted at its fastest pace in five months in January.

Further restrictions imposed by the Japanese government in response to the Omicron variant saw the PMI fall to 47.6 from December’s 52.1. Service firms also cut staffing levels at their fastest pace in 20 months.

Reports indicating that Japan could ease its strict border controls in March could help the Yen tick upward however, and provide further confidence in the country’s long-term recovery.

Taro Kano, the country’s former vaccine czar and key official, cited a need for foreign workers in order to boost Japan’s flagging economy. Whilst Covid-19 restrictions have had high support from the public, businesses have repeatedly warned of the economic impact amid a tight labour market.

GBP/JPY Exchange Rate Forecast: Will BoE Commit to Rate Hike?

Looking ahead to the rest of the week, Sterling investors will be keenly awaiting the BoE’s interest rate decision on Thursday. Should the central bank announce a rate hike as anticipated then GBP could be pushed higher against its rivals.

With no significant data for the rest of the week, JPY is likely to continue to be affected by risk appetite in the markets.

Gareth Monk

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