GBP/JPY holds above 199.00, expects fresh BoE boost

• GBP/JPY fluctuates between slight gains and small losses as traders look forward to the BoE’s policy decision.
• Fears of possible government intervention offer support to the JPY and limit the rise of the cross.
• Uncertainty over the BoJ rate hike, coupled with the risk environment, keeps a lid on the safe-haven JPY.

The GBP/JPY cross retreats a few pips after hitting a one-week high around the 199.55 region during the Asian session on Thursday, although it lacks follow-through in selling. Spot prices are currently trading just above the 199.00 level, almost unchanged on the day, as traders await the policy decision from the Bank of England (BoE) before positioning for the next directional move.

The UK central bank is widely expected to focus on a long-term outlook for slowing inflation and vote to cut interest rates by 25 basis points (bps) for the second time this year. The focus, however, will be on the BoE’s future guidance amid concerns that the expansive Autumn Budget introduced by Chancellor Rachel Reeves would boost inflation. Therefore, the release of the final Monetary Policy Report for 2024, along with BoE Governor Andrew Bailey’s comments at the post-meeting press conference, will influence the British Pound (GBP) and provide fresh impetus. to the GBP/JPY cross.

Ahead of the central bank event risk, some verbal intervention by the Japanese authorities offers support to the Japanese Yen (JPY) and acts as a headwind for the currency pair. Japan’s Chief Cabinet Secretary Yoshimasa Hayashi reiterated on Wednesday that the government intended to closely watch movements in the currency market, including speculative movements, with a greater sense of urgency. Adding to this, Atsushi Mimura, vice finance minister for international affairs and Japan’s top foreign exchange official, said Thursday that the government is ready to take appropriate action for excessive currency movements if necessary.

That said, doubts over the Bank of Japan’s (BoJ) ability to raise interest rates amid political uncertainty in Japan and the prevailing risk environment continue to undermine the safe-haven JPY. This, in turn, supports prospects for an extension of the recent GBP/JPY bullish move seen over the past week or so. The bulls, however, need to wait for some follow-up buying beyond the 199.70-199.80 region, or above a three-month high touched last week before opening new positions.