Pound Japanese yen (GBP/JPY) continues to strengthen ahead of BoJ decision
(Updated 15:45, 25/04/24) The pound Japanese yen (GBP/JPY) exchange rate continues on its earlier trajectory and has remained trading around an almost ten-year high moving into Thursday afternoon’s European session.
The Japanese yen (JPY) is still being heavily undermined ahead of the Bank of Japan’s (BoJ) upcoming interest rate decision, scheduled for tomorrow.
Analysists continue to speculate on the BoJ’s forward guidance ahead of tomorrow’s decision, with many economists speculating the yen could fall further should the central bank echo its recently dovish rhetoric.
The pound (GBP) has continued to hold steady, firming against the majority of its peers this afternoon, despite the release of some underwhelming mid-tier UK data.
The UK’s latest CBI distributive trades confirmed that distributive trades slumped in April and fell from 2 to -44, well behind a more modest -2 expectation.
At the time of writing, GBP/JPY is trading at around ¥194.35, an increase of roughly 0.5% from this morning’s opening levels.
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Pound Japanese yen (GBP/JPY) exchange rate jumps ahead of BoJ decision
The pound Japanese yen (GBP/JPY) exchange rate surged this morning, reaching an almost ten-year high.
At the time of writing, the GBP/JPY exchange rate is trading at around ¥194.80, up roughly 0.7% from this morning’s opening rate.
Japanese yen (JPY) plummets ahead of BoJ interest rate decision
The Japanese yen (JPY) is in freefall this morning and has hit some of its lowest levels against the majority of its peers since 1990.
This comes the day before the Bank of Japan’s (BoJ) latest interest rate decision, which will be closely scrutinised by markets.
The BoJ its first interest rate hike since 2007 last month. Simultaneously putting an end to eight years of negative interest rates and sparking a major sell-off in the Japanese currency following some overly dovish forward guidance.
Market fear the BoJ could strike a similarly dovish chord this month, with analysts warning that the bank will need to signal plans to significantly accelerate the tightening of its monetary policy if it is to prop up demand for the yen.
Shusuke Yamada, head of Japan currency and rates strategy at BofA Securities Japan, said:
‘For the BoJ to support the yen, it should acknowledge that policy has been too accommodative, that the next hike is as imminent as in June, and that the terminal rate would be higher than priced by the market.’
Further stymieing the Japanese currency this morning is a strengthening US dollar (USD). Sticky US inflation data has seen markets reprice their Federal Revere interest rate cuts, ultimately fuelling the yen’s weakness.
Pound (GBP) firms despite lull in data
The pound (GBP) is managing to catch bids this morning despite the absence of any notable macroeconomic data.
Potentially bolstering GBP exchange rates this morning is a cautiously upbeat market mood.
As markets opt for riskier assets this morning despite continued concerns over global trade and increasing geopolitical tensions, the increasingly risk-sensitive pound is enjoying some moderate success.
GBP/JPY exchange rate forecast: BoJ interest rate decision to drive movement?
Looking ahead, the likely catalyst of movement for the pound Japanese yen exchange rate on Friday will be Bank of Japan’s latest interest rate decision.
The central bank is expected to implement a 0.1% rate hike, this may ease some of the pressures the yen is facing. However, should markets deem the 0.1% hike too minimal or if the bank’s forward guidance remains dovish, this may see JPY exchange rates continue to plunge.
On the other hand, any signs that the bank may be considering a more aggressive pace of tightening could help the yen rebound from its recent lows. Turning to the pound, a lack of notable UK data releases may leave GBP exchange rates struggling to find a clear direction for the remainder of the week.