The GBP/JPY pair surged close to the 193.00 level on Wednesday following the Bank of England’s (BoE) decision to reduce its benchmark interest rate by 25 basis points to 4.25%, marking the fourth cut in the current easing cycle. The pair rallied during the late European session as traders responded to the central bank’s gradual and cautious tone, which signaled that future policy loosening may proceed slowly and carefully.
Although a rate cut typically pressures a currency, the British Pound defied expectations, strengthening after the announcement. This bullish reaction stemmed from divisions within the BoE’s Monetary Policy Committee (MPC), as two influential members voted to maintain rates at 4.5%, reflecting concerns about inflation persistence. At the same time, the BoE also upgraded its GDP forecast for 2025 to 1% from 0.75%, signaling optimism for the domestic economy despite easing.
Dovish Cut Meets Hawkish Dissent
Despite the 25 bps rate cut being widely anticipated, the BoE’s decision revealed a split among policymakers. While Chief Economist Huw Pill and MPC member Catherine Mann favored keeping the policy rate unchanged at 4.5%, others like Swati Dhingra and Alan Taylor supported a larger cut of 50 bps, citing subdued inflation pressures and risks to growth.
This divergence suggests the central bank is not fully committed to an aggressive easing path, and the mixed voting has boosted market confidence in the Pound’s resilience. The updated guidance underscores the BoE’s commitment to balance monetary support with inflation control, even as the UK economy gains momentum.
Japanese Yen Struggles on Diminished BoJ Tightening Bets
On the other side of the pair, the Japanese Yen (JPY) underperformed across the board, compounding the GBP/JPY upside. Diminishing expectations for Bank of Japan (BoJ) tightening have put pressure on the Yen, particularly as global trade tensions, especially those involving the United States, pose downside risks to Japan’s fragile economic recovery.
Minutes from the BoJ’s March policy meeting showed concern among officials about the potential negative impact of US trade policies, including tariffs, on Japan’s real economy. One board member warned that “downside risks stemming from US policies had rapidly heightened,” raising speculation that the BoJ might delay further hikes or even shift back to accommodative policies if the situation deteriorates.
GBP/JPY Maintains Bullish Momentum
The GBP/JPY rally toward 193.00 underscores the market’s faith in the UK’s cautious but optimistic economic trajectory, even amid monetary easing. With the BoE divided on its policy path and geopolitical tailwinds boosting the Pound, short-term sentiment favors continued strength.
Meanwhile, the Japanese Yen remains under pressure as BoJ hawkish expectations fade, driven by mounting external risks. As long as global uncertainties persist and the BoJ holds back on rate hikes, GBP/JPY could maintain its bullish trend, especially if UK–US trade developments further boost Pound sentiment.
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