GBP/JPY shows uncertainty in intraday direction, remaining above 182.00 prior to BoE announcement

The GBP/JPY currency pair is currently displaying uncertainty in its intraday direction, maintaining a position just above the 182.00 mark as the Asian trading session unfolds this Thursday. Investors appear to be in a state of anticipation, awaiting the outcome of the Bank of England’s (BoE) policy meeting scheduled for later today.

The UK’s central bank is widely expected to implement a modest rate hike of 25 basis points (bps), a decision influenced by the notable deceleration in the headline UK Consumer Price Index (CPI), which dropped to an annualized rate of 7.9% in June from the previous 8.7%. Despite this slowdown, inflation continues to exceed the BoE’s 2% target, leaving room for a possible more aggressive 50 bps rate increase. Such a move could strengthen the British Pound and consequently push the GBP/JPY pair higher.

Simultaneously, investors will be paying close attention to the monetary policy statement released alongside the meeting results and the subsequent press conference. Given the recent volatility in expectations surrounding future rate hikes, the outlook presented will play a pivotal role in dictating the next directional movement for the GBP/JPY pair.

Furthermore, a slight improvement in risk sentiment, combined with the Bank of Japan’s (BoJ) dovish stance, is diminishing the appeal of the safe-haven Japanese Yen (JPY). This dynamic is supporting spot prices and preventing a continuation of the overnight decline from a multi-week high.

It is worth noting that last week, BoJ Governor Kazuo Ueda reaffirmed the bank’s willingness to further ease monetary policy if necessary. The need for more time to sustainably reach the 2% inflation target was emphasized, and the minutes from the BoJ policy meeting revealed a unanimous agreement among members to maintain the current accommodative monetary policy. Moreover, BoJ Deputy Governor Shinichi Uchida ruled out early discussions on ending the negative rate policy, reinforcing Japan’s current phase of patiently sustaining ultra-easy policy.

This dovish position contrasts starkly with the relatively hawkish stances of other major central banks, which could continue to exert downward pressure on the JPY. This suggests that the GBP/JPY pair is more likely to trend upwards. Thus, any downward movement is projected to encounter significant support and likely remain confined near the 181.00 round-figure mark. This level could act as a critical pivot point; a break below could invalidate the positive outlook and indicate that the recent surge of nearly 700 pips from a six-week low reached last Friday has lost momentum.