- The GBP/JPY operates in negative territory for the third consecutive day around 194.45 in the early hours of the European session on Thursday.
- The BOE is expected to maintain interest rates without changes on Thursday in the midst of uncertainty about tariffs and the conflict between Israel and Iran.
- Reduced bets for the rates of the Boj this year could weigh on the JPY.
The GBP/JPY extends its fall about 194.45 during the first hours of European negotiation on Thursday. The sterling pound (GBP) weakens in front of the Japanese Yen (JPY) due to the imminent threat of a broader conflict in the Middle East and the possible participation of the US. Investors will be attentive to the decision on the interest rate of the Bank of England (BOE) later on Thursday.
It is anticipated that the BOE maintains the interest rates at 4.25% at its June meeting on Thursday. Almost all 60 respondents expected the next reduction in a quarter quarter to occur in August, and a large majority foresaw an additional cut to 3.75% in the last three months of 2025, according to a Reuters survey. Those responsible for the policy will closely monitor the impact of geopolitical tensions in the Middle East, since the conflict between Israel and Iran could raise oil prices.
“Current tensions in the Middle East are causing greater economic uncertainty. Therefore, we hope that the Bank of England will keep the rates unchanged this Thursday and implement only an additional cut this year,” said Monica George Michail, an associated economist of the National Institute of Economic and Social Research. Any escalation sign could drag the most risky assets such as sterling pound (GBP) down against Japanese yen.
On the other hand, the Bank of Japan (BOJ) could take a long pause before raising interest rates this year again. The governor of the Boj, Kazuo Ueda, said on Tuesday that the short -term attention of the Central Bank was on the downward risks for the economy of Japan, with the impact of US rates that are expected to get worse in the second half of this year, suggesting that the BOJ is in no hurry to start the increases of fees. The moderate comments of the BOJ and the uncertainty about the US commercial policy could weigh on the Japanese Yen (JPY) and help limit the losses of the GBP/JPY.
And in Japanese faqs
The Japanese Yen (JPY) is one of the most negotiated currencies in the world. Its value is determined in general by the march of the Japanese economy, but more specifically by the policy of the Bank of Japan, the differential between the yields of the Japanese and American bonds or the feeling of risk among the operators, among other factors.
One of the mandates of the Bank of Japan is the currency control, so its movements are key to the YEN. The BOJ has intervened directly in the currency markets sometimes, generally to lower the value of YEN, although it abstains often due to the political concerns of its main commercial partners. The current ultralaxy monetary policy of the BOJ, based on mass stimuli to the economy, has caused the depreciation of the Yen in front of its main monetary peers. This process has been more recently exacerbated due to a growing divergence of policies between the Bank of Japan and other main central banks, which have chosen to abruptly increase interest rates to fight against inflation levels of decades.
The position of the Bank of Japan to maintain an ultralaxa monetary policy has caused an increase in political divergence with other central banks, particularly with the US Federal Reserve. This favors the expansion of the differential between the American and Japanese bonds to 10 years, which favors the dollar against Yen.
The Japanese Yen is usually considered a safe shelter investment. This means that in times of tension in markets, investors are more likely to put their money in the Japanese currency due to their supposed reliability and stability. In turbulent times, the Yen is likely to be revalued in front of other currencies in which it is considered more risky to invest.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
