Investors bet on a Bank of Japan rate increase in September, lifting the Yen and weighing on the British Pound cross.
The GBP/JPY pair declines in European trading as the Japanese Yen gains ground on expectations of a Bank of Japan rate hike in September. Markets price in a more aggressive tightening path, with potential hikes exceeding the current pace of roughly twice a year, following signals from the BoJ’s July meeting summary.
The BoJ held rates at 1% in July but indicated a majority of board members support further tightening. Meanwhile, traders await comments from Japan’s Ministry of Finance on possible US-Japan joint intervention to curb Yen volatility, after a late-July currency support move.
Attention also shifts to upcoming UK employment and inflation data, which will influence Bank of England policy expectations. Markets currently see no near-term BoE rate hike.