- GBP/JPY rebounds to near 189.50 as markets assess the Bank of England's dovish stance.
- The BoE cuts the UK GDP growth forecast for 2025 to 0.75%.
- BoJ's Tamura projects interest rates reaching at least 1% by April 2026.
GBP/JPY rebounds to near 189.50 in Friday's North American session after hitting a four-month low of 188.00 earlier in the day. The pair recovers as the Pound Sterling (GBP) strengthens across the board, with investors digesting the Bank of England's (BoE) dovish monetary policy stance and its downward revision of the UK GDP growth forecast for 2025 to 0.75% from the 1.5% projected in November.
On Thursday, the Bank of England (BoE) cut its key interest rate by 25 basis points (bps) to 4.5%, in line with expectations. However, the vote split was more dovish than anticipated, surprising market participants.
Within the nine-member Monetary Policy Committee (MPC), seven members supported the 25 bps rate cut, while two, including noted hawk Catherine Mann, favored a more aggressive 50 bps reduction. Markets had expected eight members to back the cut and one to vote for holding rates steady.
Meanwhile, the Japanese Yen (JPY) remains under pressure despite rising hawkish bets on the Bank of Japan (BoJ). Board member Naoki Tamura suggested interest rates must rise to at least 1% by the second half of the fiscal year starting in April, citing expectations of broad-based wage growth that could fuel inflation, Reuters reported.
GBP/JPY found strong buying interest after dipping to a four-month low of 188.00, though the broader outlook remains bearish. The 20-day Exponential Moving Average (EMA), currently around 192.10, is trending downward, reinforcing negative sentiment. The 14-day Relative Strength Index (RSI) sits in the 20.00-40.00 range, indicating sustained downside momentum.
Further losses below the intraday low of 188.00 could open the door to the September 18 low of 185.80, followed by the September 16 low of 183.77. On the upside, a recovery above the February 4 high of 193.18 could push GBP/JPY toward the January 24 high of 194.76 and the January 9 peak of 195.90.
GBP/JPY daily chart
