The GBP/JPY currency pair has continued its upward trajectory, climbing to 193.10 during Tuesday’s European session. This marks the second consecutive session of gains, driven largely by a weaker Japanese Yen (JPY) amid uncertain expectations regarding a potential Bank of Japan (BoJ) rate hike in December. As traders digest mixed signals from the BoJ, the Pound Sterling (GBP) has gained ground against the JPY, reinforcing the pair’s bullish momentum.
Bank of Japan Governor Kazuo Ueda recently hinted that the timing for the next rate hike could be approaching, bolstered by strong inflation data in Japan. This has sparked speculation that the BoJ could raise rates at its December 18-19 policy meeting, potentially strengthening the Yen. However, conflicting reports have introduced uncertainty into market sentiment, with some analysts predicting that the central bank may delay a rate hike. Adding to the mix, dovish BoJ board member Toyoaki Nakamura cautioned against raising rates prematurely, which has further weighed on the Yen.
Meanwhile, the Bank of England (BoE) is widely expected to keep interest rates unchanged at 4.75% when it meets on December 19. Recent reports indicate that UK headline inflation has slightly ticked up, although it remains within the BoE’s forecasted range. As a result, investor confidence has grown that the BoE will opt for a more cautious approach, maintaining its current policy stance. This outlook has contributed to the strengthening of the Pound Sterling against its major counterparts, including the Yen.
As the markets continue to weigh the BoJ’s policy direction and the BoE’s expected decision, the GBP/JPY cross remains sensitive to shifts in both economies’ central bank outlooks. The uncertainty surrounding the BoJ’s next move, combined with the BoE’s steady stance, is likely to keep the GBP/JPY pair volatile in the coming weeks.
