• GBP/JPY enters a bullish consolidation phase as traders opt to wait for the BoE decision.
• Signs of easing inflation and softening labour market lifted bets for an intraday rate cut.
• BoJ’s hawkish tilt supports the JPY and caps the cross ahead of the policy update on Friday.

The GBP/JPY cross struggles to build on a goodish rebound from the 206.75 area, or a one-week low, touched on Tuesday, and oscillates in a narrow band during the Asian session on Thursday. Spot prices currently trade around the 208.20-208.25 region, nearly unchanged for the day, as traders seem reluctant ahead of the key central bank event risks.

The Bank of England (BoE) will announce its rate decision later today, which will be followed by the outcome of a two-day Bank of Japan (BoJ) policy meeting on Friday. Following a pause in November, the BoE is widely expected to cut interest rates amid signs of easing inflationary pressures. Adding to this, a rise in Britain’s unemployment rate to its highest since the start of 2021 and a slowdown in wage growth to an over three-year low back the case for further policy easing by the UK central bank.

This marks a significant divergence in comparison to the growing acceptance for an imminent BoJ rate hike on Friday, which, in turn, is seen as lending some support to the Japanese Yen (JPY). Apart from this, a generally weaker tone around the equity markets benefits the JPY's safe-haven status and contributes to capping the upside for the GBP/JPY cross. The JPY bulls, however, opt to wait for more cues about the BoJ's future policy path before placing fresh bets amid concerns about Japan's fiscal health.

Hence, the focus will be on BoJ Governor Kazuo Ueda's comments during the post-meeting press conference, which will play a key role in influencing the near-term JPY price dynamics and provide some meaningful impetus to the currency pair. In the meantime, the divergent BoE-BoJ policy expectations warrant caution before positioning for the resumption of the GBP/JPY pair's recent well-established uptrend from the vicinity of the 199.00 mark, or the November swing low.