GBP/JPY oscillates above 163.00, investors await BOJ and BOE monetary policies

• GBP/JPY is juggling in a 163.12-163.34 range ahead of interest rate policies.
• Japanese and the UK markets are closed on account of Respect for Aged Day and Bank Holiday respectively.
• The BOE needs a series of declines in the inflation rate to slowdown the pace of hiking interest rates.

The GBP/JPY pair is displaying topsy-turvy moves in a narrow range of 163.12-163.34 in the Tokyo session. The asset has continued its bewildering movement of the past week. The cross has turned sideways as investors are looking to initiate a well-informed decision ahead of the outcome of the monetary policy meetings by the Bank of Japan (BOJ) and the Bank of England (BOE).

The Japanese economy is worried over the depreciating yen as it is forcing the companies to halt or scale down production capacities, which are highly dependent on global inputs. This will force the BOJ to shift to a ‘neutral’ stance and avoid injecting more liquidity into the economy. As Japanese officials believe that the current yen price is not justifying the fundamentals and eventually preparing to intervene in Fx moves, it bolsters the case of shifting towards a ‘neutral’ policy. 

It is worth noting that Japanese markets are closed on account of Respect for Aged Day and UK markets are closed due to Bank Holiday. Therefore, a lackluster performance is expected from the cross.

On the UK front, last week’s release of the inflation data would support the Bank of England (BOE) but is not sufficient to trim the expected extent of the interest rate hike. The headline UK Consumer Price Index (CPI) landed lower at 9.9% against the expectations of 10.2% despite soaring energy prices. BOE Governor Andrew Bailey is expected to announce a rate hike by 50 basis points (bps).

A one-time decline in the inflation rate is not sufficient to compel the BOE to trim the hawkish tone. A series of slowdowns in the inflation rate will be lucrative to shift the policy stance.