GBP/JPY advances to 181.80 following BoJ rate decision, UK data eyed

• GBP/JPY gains momentum around 181.85 after the Bank of Japan (BoJ) key event.
• BoJ decided to keep its short-term rate target of -0.1% and its 10-year bond yield target of around 0%.
• The Bank of England (BoE) maintained the benchmark rate at 5.25% on Thursday.
• Market players will monitor the UK Retail Sales, Purchasing Manager Index (PMI) data due later on Friday.

The GBP/JPY cross surges to 181.80 after accelerating the downside momentum to a seven-week low of 180.70 during the Asian session on Friday. The rebound of the cross is bolstered by the Bank of Japan (BoJ) interest rate decision after central bank policymakers decided to maintain the current monetary policy unchanged.

After the highly-anticipated September monetary policy meeting, the Bank of Japan (BoJ) board members decided to keep its short-term interest rate target of -0.1% and its 10-year bond yield target of around 0%, as widely expected by the market. However, a divergence in monetary policy between the BoJ and the Bank of England (BoE) weighs on the Japanese Yen (JPY) and acts as a tailwind for the GBP/JPY cross.

Earlier on Friday, Japan’s National Consumer Price Index (CPI) for August came in at 3.2% YoY from 3.3% in July. Additionally, the National CPI ex Fresh Food improved from 3.0% in July to 3.1% in August, whereas the National CPI ex Food, Energy came in at 4.3% compared to 4.3% in previous readings.

The Bank of England (BoE) stunned market participants on Thursday by maintaining the benchmark rate at 5.25% rather than raising it by 25 basis points (bps) to 5.5% as anticipated. British central bank decided to pause its long run of interest rate hikes as the economy slowed and inflation decreased, but BoE Governor Andrew Bailey underlined that the central bank did not believe its work was over. He added that he would not forecast the BoE's next action, but that it would be "very, very premature" to cut interest rates.

Moving on, the UK Retail Sales and Purchasing Manager Index (PMI) data will be released on Friday. The monthly Retail Sales for August are expected to improve from -1.2% to 0.5%, while Composite PMI is expected to rise from 48.6 to 48.7. Traders will take cues from these figures and find trading opportunities around the GBP/JPY cross.