The GBP/JPY pair has reached a new high of 196.00 amidst uncertainty surrounding the Bank of Japan’s interest rate outlook. The BoJ expects inflation to rise in the future but has also projected weak economic growth. In the UK, strong Services PMI data has heightened concerns about ongoing inflationary pressures.
The recent interest rate decision by the Bank of Japan met market expectations, with rates remaining steady between 0% and 0.01%. The central bank is still aiming for policy normalization and stated it would adjust monetary easing if inflation rates increase. However, doubts have arisen among investors regarding the feasibility of achieving higher inflation with weak economic growth, leading to uncertainty about potential policy tightening.
Additionally, Tokyo’s CPI data for April came in softer than expected, casting further doubt on Japan’s ability to reach its 2% inflation target. On the other hand, the Pound Sterling is performing well due to strong Services PMI figures in the UK. The robust Services PMI numbers are fueling concerns about persistent inflation, which could result in higher interest rates in the UK to combat rising prices.
Overall, the GBP/JPY pair continues to climb, driven by uncertainty over the BoJ’s interest rate outlook and fears of lingering inflationary pressures in both Japan and the UK.