GBP/JPY slumps to 7-week low below 181.00 after BoE leaves key rate unchanged

• GBP/JPY came under heavy bearish pressure and dropped to multi-week lows on Thursday.
• Bank of England left its policy rate unchanged at 5.25% in split vote.
• Bank of Japan will announce policy decisions early Friday.

GBP/JPY turned south in the European session on Thursday and dropped to its lowest level since early August at 180.83 before recovering to the 181.50 area. As of writing, the pair was down 0.9% on the day at 181.54.

Following the September policy meeting, the Bank of England (BoE) decided to leave the interest rate unchanged at 5.25%. Although investors were expecting the BoE to raise the policy rate by 25 basis points, soft inflation data from the UK revived expectations for a no change. "inflation has fallen a lot in recent months, we think it will continue to do so," the BoE said in its policy statement.

Nevertheless, the immediate reaction caused Pound Sterling to suffer large losses against its major rivals. GBP/USD was last seen losing 0.6% on the day and EUR/GBP was up 0.4% at 0.8670, highlighting the negative impact of the BoE's policy decision on the currency.

According to Reuters, the chance of the BoE raising rates by 25 bps in November declined to 64% from 81% before the rate decision.

During the Asian trading hours on Friday, the Bank of Japan will announce its monetary policy decisions. Investors expect the BoJ to keep its policy settings, including the yield curve control strategy, unchanged. 

Technical levels to watch for