Gbpjpy Holds Its Ground

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Gbpjpy Holds Its Ground

Gbp/Jpy Holds Its Ground Near 196.00

The surprise rate hike from the Bank of Japan led to intraday losses in the GBP/JPY cross. However, most of it was recovered quickly, as the cross is now trading near 196.20. The cross is very close to the 196.00 support, and there's a chance of retesting as the Japanese Yen is in high spirits.

The Bank of Japan announced a change to the short-term rate and made a rate hike of 15 bps. This means the new range for the short-term rate is now 0.15% - 0.25%.

Boj To Reduce Its Jgb Program

Additionally, the Bank of Japan is also expected to reduce its JGB program from 3 trillion to around 6 trillion. The process will be gradual and will be completed by Q2 2026. However, more details will likely be provided by the BoJ in the upcoming press conference.

According to Chief Cabinet Secretary 'Hayashi,' the government and the central bank will coordinate with each other to achieve the targets. He emphasized how the central bank is working alongside the government to achieve the inflation target.

If we look at the UK's side, a rate cut from the BoE is looming and limiting the GBP/JPY upside. According to the market, there's a 58% chance that the Bank of England will introduce a 25 bps rate cut. If this happens, the interest rate in the UK will be reduced to 5.0%.

Meanwhile, the US Federal Reserve will likely have no chance to increase its interest rates. However, the US Central Bank will provide insights into whether September's rate cut is still on the cards or if it is delayed, as we have seen several times in the past.

The bottom line is that the JPY received a boost from the rate hike while the GBP is under pressure due to the upcoming rate cut. Despite this, the rate differential between the two currencies is very clear, thus limiting any major downside in the GBP/JPY.

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