Snapshot: GBP/JPY is trading flat at 213.45. The Bank of England’s hawkish hold stance, with two MPC members voting for a hike, is the dominant domestic driver. Today’s focus remains on the potential for upside inflation surprises to tilt the next BoE decision towards a rate increase.
- BoE’s hawkish hold: Two MPC members voted for a 25bp hike to 4% at the last meeting, signalling persistent concerns over services inflation and second-round energy effects.
- BoJ’s active normalisation: Markets are pricing further hikes from the Bank of Japan, with real rates remaining deeply negative, creating a widening differential.
Bias into NY: The setup favours a gradual grind higher in GBP/JPY as the BoE’s hawkish bias clashes with the BoJ’s ongoing normalisation, with potential for upside if US yields continue their retreat.