GBP/JPY Plummets in Reaction to the BoJ’s Hawkish Twist

gbp/usd

The GBP/JPY cross comes under intense selling pressure on Tuesday and plunges to its lowest level since October 12 in reaction to the Bank of Japan’s hawkish twist. Spot prices, however, manage to recover around 150 pips and jumps back above the 162.00 mark during the early European session.

The Japanese Yen rallies across the board after the Japanese central bank announced its monetary policy decision, which, in turn, prompts aggressive selling around the GBP/JPY cross.

In an unexpected move, the BoJ widened the allowable trading band for the 10-year government bond yield to 50 bps on either side of the 0% target from the 25 bps previous. This is seen as a step towards the policy normalization process, which, in turn, provides a strong boost to the JPY.

The BoJ, however, sticks to its dovish guidance and pledges to ramp up monetary stimulus as needed. The central bank also projects that interest rates will move at current or lower levels.

In the post-meeting press conference, BoJ Governor Haruhiko Kuroda said that Japan’s economy still faces a lot of uncertainty and sees inflation growth fading in 2H 2023. This caps the upside for the JPY and assists the GBP/JPY cross to attract some buyers near the 160.80-160.75 area.

Any meaningful recovery, however, still seems elusive, warranting some caution for bullish traders. The prevalent risk-off mood, amid growing recession fears, should continue to benefit the JPY’s relative safe-haven status.

Apart from this, a dovish outcome from the Bank of England meeting last week, with two MPC members voting to keep interest rates unchanged, might undermine the GBP. This, in turn, acts as a headwind for the GBP/JPY cross and keeps a lid on the intraday uptick.

Even from a technical perspective, a convincing break below the very important 100 and 200-day SMAs favors bearish traders and supports prospects for the emergence of fresh sellers at higher levels. Hence, any subsequent move up could be seen as a selling opportunity and runs the risk of fizzling out quickly in the absence of relevant economic data from the UK.

This Post Has One Comment

Leave a Reply

Important Link

Fund Your Deriv Account
Withdraw Funds to Your Local Currency
VIP Trading Signals
Learn To Trade

Contact Us

Follow Us

Disclaimer

Forex, Crypto, Options, and Binary Options have both large potential rewards and large potential risks. Therefore, before investing or trading any of the assets, ensure you are aware of and willing to accept the accompanying risks. Do not trade money you cannot afford to lose.

All Rights Reserved. None of the content of this website can be published elsewhere by any means without the prior consent of the owner(s). Please, check our terms & conditions and privacy policy before continuing to use this website.

This website and its owner(s) are not in any way liable for any incurred loss, whether caused by the information provided on this website or otherwise. The use of this website, including the content and information provided, is the user’s sole liability.