GBP/JPY sees a cushion around 163.00, investors await BOE policy

  • GBP/JPY is expected to find buyers around 163.00 ahead of the hawkish BOE.
  • Lower GDP and higher jobless rate may restrict the BOE to see beyond a 25 bps rate hike.
  • The BOJ will continue with its ultra-loose monetary policy on Friday.

The GBP/JPY pair is gauging cushion around 163.00 after a corrective move from 163.80 in the late Tokyo session. On a broader note, the cross is gradually advancing higher after hitting a two-week low of 161.66 on Tuesday.

In today’s session, the interest rate decision by the Bank of England (BOE) will dictate the further price action. Considering the estimates, the BOE may announce a rate hike by 25 basis points (bps), which will push its benchmark rate to 1.25%. The UK economy is facing the headwinds of soaring inflation. Tackling an annual inflation figure of 9% is not a cakewalk in times when the economy is failing to generate employment opportunities and elevate growth prospects.

The UK Office for National Statistics reported a slump in the Gross Domestic Product (GDP) figures. The monthly UK GDP turned negative, landing at -0.3% against the expectation of 0.2%. On the labor market front, the economy reported the jobless rate at 3.8%, however, the Average Earnings excluding bonuses remained stable at 4.2% against its prior print.

Meanwhile, the yen bulls are expected to underperform as the Bank of Japan (BOJ) is expected to withstand with its ultra-loose monetary policy. The BOJ will announce its monetary policy on Friday. Despite the fact that the inflation rate in Tokyo has crossed the 2% target, the BOJ will flush liquidity into the economy. Higher price pressures are majorly contributed by firmer oil prices, however, broad-based recovery in the aggregate demand is demanded in the Japanese economy.

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