The GBP/JPY cross trades sharply lower near 213.20 on Thursday, losing around 2.4% as a sudden surge in the Japanese Yen (JPY) overwhelms the British Pound’s reaction to the Bank of England’s (BoE) monetary policy announcement.
The BoE maintained its benchmark interest rate at 3.75%, as widely expected
However, the decision was considered a hawkish hold after six policymakers voted to maintain rates and three supported a 25-basis-point increase to 4.00%. Markets had generally expected only two members to vote for a hike. The BoE acknowledged that United Kingdom (UK) inflation declined to 2.6% in June but warned that higher energy prices could push inflation back up later this year.
Policymakers also indicated that the risks surrounding the inflation outlook remain tilted to the upside, particularly if elevated energy costs generate stronger wage and price pressures. Despite the hawkish vote split, Sterling failed to retain support against the Yen. The Japanese currency strengthened abruptly across the market, sending USD/JPY below 160.00 and causing substantial declines in EUR/JPY and GBP/JPY.