Snapshot: GBP/JPY remains locked in a battle between a cautious Bank of England holding at 4.50% and the Bank of Japan’s slow normalisation path. With UK services CPI sticky near 5% and the BoJ keeping its policy rate at 0.50% overnight, Sterling’s yield advantage persists but is increasingly capped by MoF intervention fears. Today’s JPY policy holds and Governor Ueda’s press conference reinforce that any further Yen recovery relies on global risk flows rather than immediate BoJ action.
- Domestic Signal: Despite UK core CPI cooling to 2.5% in April, the BoE’s 8-1 vote split and persistent wage pressures keep the path to a rate cut highly data-dependent, offering solid baseline support to Sterling on the crosses.
- NY Session Watch-Item: Treasury yields (US 10Y at 4.48%) and a rising US 10Y Real Yield of 2.17% will dictate broader risk appetite; a sudden selloff in US equities (VIX at 16.2) could trigger a rapid unwinding of the Yen carry trade.
Bias into NY: We hold a mildly bearish tactical bias on the Guppy, expecting heavy selling pressure on rallies as MoF intervention risk escalates. Look for consolidation in the cross, with global risk-off headlines acting as the main catalyst for a downside break.