Pound Japanese Yen (GBP/JPY) Exchange Rate Plummets as BoE Hikes Rates by 0.75%

Pound Japanese Yen (GBP/JPY) Tumbles Further as BoE Forecasts Two-Year Recession

(Updated 16:43 03/11/22)

The Pound Japanese Yen (GBP/JPY) exchange rate fell even further over the course of the day. The Bank of England’s poor outlook for the UK’s economy weighed on the currency pair.

The prospect of the UK’s longest recession since records began added to GBP/JPY’s woes. The BoE forecast that the UK’s recession would last through 2023 and into the first half of 2024.

Melanie Baker, senior economist at Royal London Asset Management, said:

‘Interest rate hikes, in an effort to lower inflation, are worsening the near-term economic outlook. The decision, forecast and minutes today are consistent with downside risk.’

At time of writing the GBP/JPY exchange rate is at around ¥165.6450, which is down roughly 1.6% from this morning’s opening figures.

Pound Japanese Yen (GBP/JPY) Exchange Rate Nosedives as BoE States UK Already in Recession

(Updated 12:19 03/11/22)

The Pound Japanese Yen (GBP/JPY) exchange rate is plummeting today following the Bank of England’s (BoE) interest rate decision. The central bank’s 0.75% rate hike had largely been priced in by markets, meaning that the focus was on the accompanying press conference.

The BoE stated that the UK was now in a recession that was likely to last until 2023. Additionally, the central bank signaled that they begin to slow their pace of policy tightening in an attempt to limit the length of said recession. The poor outlook and dovish tone are both likely weighing on the Pound, pushing GBP/JPY to fresh lows.

At time of writing the GBP/JPY exchange rate was at around ¥166.4680,  which is down roughly 1.1% from the morning’s opening figures.

Original article continues below:

Pound Japanese Yen (GBP/JPY) Exchange Rate Tumbles ahead of BoE Rate Decision

The Pound Japanese Yen (GBP/JPY) exchange rate is falling today. The currency pair is struggling amid reduced bets ahead of the Bank of England’s (BoE) interest rate hike. GBP/JPY is also seeing losses amid speculation over the Bank of Japan’s (BoJ) interest rate policy.

At time of writing the GBP/JPY exchange rate is at around ¥166.7490, which is down roughly 1% from the morning’s opening figures.

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

The Pound (GBP) is slipping today as investors limit aggressive bets on the currency ahead of the BoE’s interest rate decision. A retreat in risk appetite may also be weighing on Sterling.

The central bank is widely expected to raise interest rates by 0.75% today in response to double-digit inflation. The knock-on effect on the UK’s economic performance has also led to markets pricing in the bumper rate hike.

The potential impact of the UK’s autumn budget statement has led to speculation of a slower pace of rate hikes, however. Economists believe such a move may be necessary to prevent the UK from falling into a deep recession. This in turn may be weighing on the Pound today.

Some analysts are even forecasting a 0.5% rate hike from the BoE today due to the impact a more aggressive move could have on the mortgage markets.

Victoria Scholar, head of investment at interactive investor, said:

‘The Monetary Policy Committee’s vote is likely to be divided with the potential for a less aggressive 50 basis point hike instead. The size of the increase will signal how concerned Bank of England policymakers are about inflation versus a recession.’

Japanese Yen (JPY) Boosted by Hints of BoJ Policy Change

The Japanese Yen (JPY) is climbing higher amid a risk-off market mood today. Missile tests in the direction of Japan by North Korea are likely adding to the retreat in risk appetite.

Residents of central and northern Japan were advised to seek shelter on Thursday. Later reports indicated the missile had broken apart over the Sea of Japan.

The Yen may also be finding support today from hints that the Bank of Japan (BoJ) could bring an end to its policy of ultra-low interest rates.

Speaking to the country’s parliament on Thursday, BoJ Governor Haruhiko Kuroda said:

‘If Japan sees prospects that inflation will head for 2% accompanied by wage hikes, a tweak to monetary policy will of course become necessary.’

The Yen may come under pressure after the US Federal Reserve’s interest rate decision on Thursday, however. The Fed’s 0.75% boosted the US Dollar which may be capping gains for JPY.

GBP/JPY Exchange Rate Forecast: Will BoE Push Ahead with Bumper Rate Hike?

Looking to the rest of the week for the Pound, the BoE’s interest rate decision is likely to cause movement in the currency. Investors will be most focused on the central bank’s forward guidance, given that the expected 0.75% rate hike has been largely priced in. Economists are expecting a dovish tilt from the BoE following the announcement which could weigh on Sterling.

On Friday, a forecast weaker performance for the UK’s construction sector could also keep pressure on the Pound if figures print as expected.

Finally for Sterling, domestic headlines could continue to generate headwinds for the currency.

For the Yen, the final reading of October’s PMI for the country’s services sector could boost the currency. The figures are expected to indicate a expansion in the sector for the third consecutive month.

Gareth Monk

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