GBPJPY – BoE Forecast to Hike Interest Rates Again

GBPJPY rallied over 700+ pips last week, with the Bank of England expected to hike interest rates further, could GBPJPY prices trade even higher?

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GBPJPY – BoE Forecast to Hike Interest Rates Again, Casting a Spotlight on GBP Strength and JPY Weakness

The BoE is expected to raise rates from the current 4.50% to 4.75% this week, amid the continuing struggle against soaring inflation rates in the UK economy.

In recent conversations, the BoE Governor has alluded to the possibility of rates soaring as high as 5.75%, underscoring the urgency of inflation control in the UK. The inflation rate, currently hovering at an alarming 8.1%, is contributing to escalating cost pressures, squeezing businesses and households alike. This predicted interest rate hike, thus, is part of a broader strategy to curtail inflation and stabilize the economy.

These events on the home front, coupled with international monetary policy decisions, are creating interesting dynamics for the GBPJPY currency pair. The Bank of Japan, in stark contrast to the BoE, is steadfastly maintaining ultra-low interest rates, which is contributing to a steady devaluation of the JPY.

The stark divergence in the monetary policy paths adopted by the Bank of England and the Bank of Japan is acting as a key driver for the GBPJPY exchange rate. While the BoE is tightening its monetary policy to combat inflation, the Bank of Japan’s persistence with ultra-low interest rates is effectively diluting the JPY’s value. The resulting situation is a classic case of currency valuation tension in the world of foreign exchange.

Looking at the broader picture, the BoE’s interest rate hike could further strengthen the GBP against the JPY. The rate hike serves as a positive signal to the markets, indicating a robust response to domestic inflationary pressures. Meanwhile, the Bank of Japan’s sustained low interest rates might further weaken the yen, driving an upward trajectory for the GBPJPY.

GBPJPY

The price on the chart has traded through multiple technical levels and some observations included:

• Price traded through multiple levels of resistance including the recent resistance of 176.00.
• The next level of resistance is 188.00, the highs of November 2015.
• Traders could anticipate further long trading opportunities on pullbacks. 

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About The Author

Jonathan Kibbler

Jon Kibbler, our Senior Market Analyst, boasts over a decade of trading experience. He specializes in dissecting the intricacies of financial markets and sharing his expertise with precision. Jon’s insights have been featured at renowned events and platforms like Coindex, Forex Analytix, and Forex.com.

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