GBP/JPY surpasses 164.00 firmly as odds of a BOJ’s prudent policy advances

• GBP/JPY has scaled above 164.00 swiftly on BOE-BOJ policy divergence.
• An unchanged policy stance is expected from the BOJ to keep injecting money into the economy.
• The BOE raised its interest rates by 25 bps to 1.25%.

The GBP/JPY pair has overstepped its two-day high and has crossed the critical resistance of 164.00 swiftly on advancing odds of an ultra-loose monetary policy by the Bank of Japan (BOJ). A policy divergence between the Bank of England (BOE) and the BOJ has strengthened the pound bulls against the Japanese yen.

The BOE elevated its interest rates by 25 basis points (bps) in its monetary policy meeting on Thursday. Officially, the interest rates have increased to 1.25%. The decision by BOE Governor Andrew Bailey and its co. was in-line with the expectations of the market participants. Considering the price pressures in the UK economy, a rate hike by 50 bps should have been featured but lower growth prospects keep on restricting the BOE to tighten its policy at full capacity.

The UK Consumer Price Index (CPI) has climbed above 9% on an annual basis and higher price pressures are eating the paychecks of the households vigorously. Therefore, the BOE is badly needed to restore lower inflation levels sooner rather than later.

Coming back to the Tokyo front, the BOJ will continue to release helicopter money into the economy as their 2.5% annual inflation rate is majorly contaminated by costly oil prices. The saga of advancing price pressures will continue for the BOJ and an unchanged policy is expected.