GBP/JPY Shows Mammoth Spike As Boe Raises Interest Rates By 50 Bps To 5%

The GBP/JPY pair has shown an extremely wild gyration in a 180.70-182.50 range as the Bank of England (BoE) has surprisingly raised interest rates by 50 basis points (bps) to 5%. The street was anticipating a 25 bp interest rate hike. However, there was a sizeable risk of a bigger interest rate hike. Seven of nine Monetary Policy Committee (MPC) members voted in favor of a rate hike as expected by the market participants.

On Wednesday, UK inflation was surprisingly higher than expected. The monthly headline Consumer Price Index (CPI) for May expanded at 0.7%, matching April’s rate but remained higher than the estimated pace of 0.5%. On an annual basis, headline inflation remained steady at 8.7%, while the market anticipated a deceleration to 8.4%.

Core UK CPI that strips off the impact of volatile oil and food prices printed a fresh high of 7.1% against expectations of steady performance. UK’s core inflation is moving in the wrong direction despite BoE Governor Andrew Bailey raising interest rates for the 13th time in a row.

Investors are worried that the promise of halving inflation by year-end made by UK PM Rishi Sunak will be missed amid an absence of evidence of a decline in inflationary pressures. Also, UK FM Jeremy Hunt is avoiding tax cuts as it could infuse fresh blood into inflationary pressures.

On the Japanese Yen front, a continuation of the already decade-long ultra-dovish interest rate policy is expected from the Bank of Japan (BoJ) to keep inflation above 2%. Meanwhile, BoJ policymaker Asahi Noguchi has warned that the effect of costly imported goods could disappear around September. Therefore, the central bank must keep rates lower to ensure inflation remains well-supported above 2% through higher wages.

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


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.