GBP / JPY recovers returning near 151.00 after the BoE statements

• GBP / JPY caught aggressive offers in reaction to a more aggressive policy statement from the Bank of England.
• The Bank of England indicated that a modest policy adjustment would likely be necessary.
• The risky mood undermined the JPY and continued to support the momentum.

The British pound strengthened across the board after the Bank of England announced its policy decision, pushing the crossover GBP/JPY to three-day highs, around the 150.85 region in the past hour.

As widely anticipated, the UK central bank left the benchmark interest rate unchanged at 0.10% and the Asset Purchase Ease stable at £ 895bn at the end of the September policy meeting. In the accompanying policy statement, the Bank of England indicated that a modest adjustment would likely be necessary during the forecast period to be consistent with meeting the inflation target on a sustainable basis.

Markets now appear to have started pricing on prospects for an early rate hike and now see the Bank of England benchmark rate at 0.5% in September 2022, before November 2022 ahead of the announcement. This, in turn, provided a strong boost to the British pound and helped the GBP / JPY cross capitalize on this week’s rebound from levels below 149.00, or month-long lows touched on Tuesday.

On the other hand, the prevailing risk appetite climate continued to weigh on the Japanese yen as a safe haven and further contributed to the strong supply tone surrounding the GBP / JPY cross. The combination of factors may already have set the stage for additional gains. Therefore, a subsequent strength to test the next relevant hurdle, near the 151.30-35 region, remains a clear possibility.

Technical levels