GBP/JPY forecast ahead of the BoJ and BoE decisions

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on Mar 17, 2024
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  • The GBP to JPY pair will be in focus this week.
  • The BoJ and the Bank of England will deliver their decisions.
  • Economists expect the BoJ will deliver its first rate hike in 17 years.

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The GBP/JPY exchange rate will be in the spotlight this week as the Bank of Japan (BoJ) and Bank of England (BoE) decisions. The pair rose to 190 on Friday and is slowly nearing the year-to-date high of 191.24.

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BoJ and BoE decisions ahead

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This will be a big week for the GBP/JPY and other forex majors as key central banks are set to deliver their decisions.

The most important one to watch will be the Bank of Japan, which will conclude its two-day meeting on Tuesday. This will be a crucial meeting because the bank will either hike interest rates for the first time in more than a decade or provide a sign of when it will start hiking.

The BoJ has maintained negative interest rates since 2016. It avoided more cuts during the pandemic when all central banks were slashing them. It has also delayed hiking rates even as data showed that Japan’s inflation remained at an elevated level.

Therefore a BoJ rate hike will likely move the market substantially this week. Besides, the bank has never hiked rates in over 17 years. It left rates low for so long in a bid to support the economy, which has gone through stagnation for years.

The current conditions justify a rate hike by the BoJ. Inflation has remained above the 25 target rate and wage growth has been quite strong. Many Japanese companies have signalled that they will hike wages soon. Further, Japan’s key exchanges like Topix and Nikkei 225 have surged to their all-time highs.

The GBP/JPY pair will also react to the upcoming Bank of England decision. In it, the bank is expected to leave rates unchanged. Most analysts expect that the BoE will be the last central banks in the G7 to cut interest rates.

The most recent numbers show that the UK economy is doing modestly better than expected, with wage and housing prices rising.

GBP/JPY technical analysis

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GBP/JPY

The daily chart shows that the GBP to JPY exchange rate has moved sideways in the past few days. It has found a strong resistance point at 191.24, its highest point this year. This price is along the upper side of the ascending channel.

The GBP/JPY pair has remained slightly above the 50-day moving average, which is a positive sign. However, the MACD and the Percentage Price Oscillator (PPO) have all pointed downwards. 

Therefore, the outlook for the pair is neutral ahead of the BoJ and BoE decisions. The key levels to watch will be at 191.24, its highest swing this year, and the 50-day moving average at 188.11.

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