GBP/JPY steadies around 161.00 as BOE’s rate hike weakens pound
05.05.2022, 22:24

GBP/JPY steadies around 161.00 as BOE’s rate hike weakens pound

  • GBP/JPY eyes more weakness as BOE has warned signs of recession.
  • The UK corporate are failing to create more jobs and households are facing the heat of higher living costs.
  • The Japanese yen is enjoying the pullback season but the downside is still intact.

The GBP/JPY pair is displaying back and forth moves in a tight range of 160.54-161.50, followed by a firmer downside move after the asset failed to overstep 164.00 on Thursday. The asset has turned into negative territory after the rate hike decision by the Bank of England (BOE) in the previous trading session.

The announcement of a rate hike came in line with the expectations of the market. The BOE elevated its interest rates by 25 basis points (bps) to 1%. This is the consecutive fourth rate hike by the BOE with a 6-3 majority for a quarter to a percent rate hike. The minority members advocated for a 50 bps rate hike. Despite an expected announcement, the sterling faced intense selling pressure after the BOE warned of signs of recession as households are facing the headwinds of higher living costs due to scaling oil prices and energy costs. Along with that, UK corporates are struggling to generate more job opportunities, which can affect the labor market and eventually the fifth largest economy in the world.

Meanwhile, the Japanese yen is enjoying a tad longer pullback season however, the downside is still intact. The ultra-loose monetary policy by the Bank of Japan (BOJ) will stay for longer. More stimulus into the economy will remain the major agenda of the BOJ, which will keep yen on the edge.

 

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