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GBP/JPY Rises After BoE Cuts Rates, Signals Gradual Easing Path
Summary:
GBP/JPY surges toward 193.00 as the Bank of England delivers a cautious 25bps rate cut, surprising markets with a hawkish tilt despite easing
Trading
192.498
ENTRY
197.400
TGT
191.000
SL
193.137 -0.079 -0.04%
0
Point
Flat
191.000
SL
CLOSING
192.498
ENTRY
197.400
TGT
The British Pound rallied sharply against the Japanese Yen on Thursday, pushing the GBP/JPY pair close to the psychological 193.00 mark, as investors digested the latest policy decisions from the Bank of England and recalibrated expectations for Japanese monetary policy. The move came in the wake of a widely anticipated 25 basis point interest rate cut by the BoE, bringing its benchmark rate down to 4.25%, yet the market response defied conventional wisdom the Pound gained.
While rate cuts typically weigh on a currency, Sterling found support from the nuanced messaging within the central bank’s policy decision. Most notably, two members of the Monetary Policy Committee Chief Economist Huw Pill and Catherine Mann voted to keep rates steady at 4.5%, signaling internal divisions and suggesting that the BoE remains far from an aggressive easing cycle. This hawkish dissent, coupled with the Bank’s upward revision of UK GDP growth for 2025 from 0.75% to 1% served as a signal that policymakers are growing more confident in the economy’s underlying resilience.
In a nod to economic caution, however, two other MPC members Swati Dhingra and Alan Taylor voted for a steeper 50bps cut, underscoring a divergence in views on inflation risks and growth potential. The Bank opted to retain its forward guidance centered around a “gradual and careful” approach to any further monetary policy loosening, reinforcing the sense that this is not a pivot into aggressive stimulus, but rather a managed, stepwise adjustment calibrated to evolving macroeconomic signals.
For Sterling bulls, this decision created a perfect narrative storm. The presence of internal policy hawks amidst a rate cut signaled that the door to higher-for-longer interest rates remains ajar a scenario that traditionally underpins currency strength. Investors have also latched onto broader macro-political themes, including a potential trade deal announcement between the UK and the United States.
According to a report from The New York Times, US President Donald Trump is poised to unveil a new bilateral trade deal with a “highly respected country” a remark many have interpreted to mean the United Kingdom, based on Trump’s own post on Truth Social. If confirmed, such a development could provide a longer-term tailwind for Sterling, reinforcing trade ties in a post-Brexit landscape and injecting a degree of investor optimism into the UK’s economic trajectory.
Across the Pacific, the Japanese Yen extended its losing streak, weighed down by growing skepticism that the Bank of Japan will initiate further rate hikes in the near term. The central bank’s March meeting minutes, released Thursday, painted a cautious picture. While inflation has shown signs of stickiness, BoJ officials flagged significant downside risks to the domestic economy particularly those stemming from U.S.-led international policy decisions.
One member cited the “rapidly heightened” downside risks stemming from the U.S.’s evolving tariff stance, adding that these policies could have a “significant negative impact” on Japan’s real economy. With global trade tensions potentially flaring under President Trump’s leadership, the BoJ appears inclined to maintain a defensive posture rather than venture into tightening mode.
This dovish tone has further sapped appetite for the Yen, especially as rate differentials between Japan and its developed market peers remain stark. Traders increasingly view the JPY as a funding currency in the current macro environment, exacerbating its underperformance against higher-yielding counterparts like the Pound.
Technical Analysis
Technically, GBP/JPY has confirmed a bullish breakout from a well-defined falling wedge pattern on the 4 hour chart — a classic reversal structure that suggests the pair’s recent pullback has concluded and a new bullish phase may be underway.
The breakout, confirmed by a strong and impulsive candle, comes with improving volume metrics and a series of higher lows, pointing to sustained buyer interest. The 190.000 handle provided solid support during recent dips, and the breakout above wedge resistance at 192.000 turns that zone into a fresh demand area.
As of writing, GBP/JPY is consolidating near 192.100, with momentum favoring a continuation toward the next major resistance at 195.000. If bulls maintain control, an extension toward the psychologically significant 197.400 zone appears increasingly plausible, particularly as macro fundamentals align with the technical setup.
TRADE RECOMMENDATION
BUY GBPJPY
ENTRY PRICE: 192.50
STOP LOSS: 191.00
TAKE PROFIT: 197.40
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Warren Takunda, a seasoned finance leader specializing in the Middle East, is a trusted senior analyst with a proven track record. As head of the finance team, he excels in financial planning, analysis, and reporting. Warren's expertise in financial modeling and investment analysis delivers valuable insights to clients.
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