Snapshot: GBP/JPY is pressing aggressively higher following the Bank of England’s decision at 12:00 BST to maintain the Bank Rate at 3.75%. The decision, backed by an 8-1 vote split, underscores the MPC’s reluctance to ease policy while UK core inflation remains sticky at 2.6% and average earnings hold at 4.0%. This hawkish holding pattern contrasts sharply with the Bank of Japan’s ultra-slow normalisation stance at 0.50%, widening the policy divergence in favour of Sterling.
- Gilt-JGB yield differentials continue to anchor the uptrend, as the BoE’s refusal to commit to a dovish path effectively stamps out near-term easing expectations and squeezes outstanding Yen shorts.
- Tokyo intervention risk remains the primary downside threat for the NY session; any rapid move in the Yen past prior MoF defense zones will trigger sharp, algorithmic headline flushes.
Bias into NY: We hold a structural bullish bias targeting further Sterling appreciation, as solid domestic yield support post-BoE should easily absorb any temporary risk-off sentiment in the US morning session.