Yesterday, during Tokyo trading hours, Japan’s Economy Minister Akazawa made comments that increased expectations for an interest rate hike in Japan. Because of this, GBP/JPY dropped from the upper 192 yen level to 191 yen. Later, there was some buying, but the price remained weak and fell to 190.30 yen during New York trading hours.
Today, the Bank of England (BOE) is expected to cut interest rates by 0.25% for the first time in two meetings. However, this is already expected by the market, so the British pound has risen against the U.S. dollar. Still, with December inflation lower than expected, the BOE is likely to continue supporting more rate cuts in the future.
Because Japan may raise interest rates while the UK lowers them, the interest rate gap between the two countries will become smaller. Also, trade policies from the Trump administration may put more pressure on the British pound. Because of these reasons, GBP/JPY may continue to move lower.
GBP/JPY Expected Range: 191.80 – 190.00 yen
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