GBP/JPY eases as Yen strengthens on rising BoJ rate-hike expectations

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The British Pound (GBP) trades on the backfoot against the Japanese Yen (JPY) on Thursday, as the Yen strengthens broadly on growing expectations of a Bank of Japan (BoJ) rate hike next week.

GBP/JPY under pressure as the Yen strengthens on growing expectations of a BoJ rate hike next week.
Markets now widely price a BoJ rate increase to 0.75%, according to the latest Reuters poll.
BoE decision is also in focus as easing inflation and sluggish growth strengthen the case for a December rate cut.

The British Pound (GBP) trades on the backfoot against the Japanese Yen (JPY) on Thursday, as the Yen strengthens broadly on growing expectations of a Bank of Japan (BoJ) rate hike next week. At the time of writing, GBP/JPY is trading around 208.40, easing slightly after climbing to its highest level since August 2008 earlier this week.

After a period of fading conviction, markets are once again largely pricing in a BoJ rate hike. According to the latest Reuters poll, 90% of economists, or 63 of the 70 surveyed, expect the Japanese central bank to raise short-term interest rates to 0.75% from 0.50% at next week's meeting. That marks a sharp increase from 53% in the previous poll conducted last month.

The poll also found that about two-thirds of analysts, 37 of 54, see the rate moving to at least 1.00% by the end of next September.

The shift in expectations comes as Japan’s inflation readings remain well above the BoJ’s 2% target. Governor Kazuo Ueda recently said the central bank is getting closer to achieving its inflation objective in a more sustainable way.

Earlier this month, he also signalled that policymakers will actively weigh the pros and cons of a rate increase at the December monetary policy meeting. Ueda cautioned that waiting too long to raise rates could allow inflation to accelerate sharply.

In the UK, the Bank of England (BoE) will also announce its interest rate decision next week, with markets widely anticipating a quarter-point cut. According to a Reuters poll, most economists expect the BoE to reduce the Bank Rate to 3.75% at the December 18 meeting as inflation continues to ease and economic growth remains modest.

Attention now turns to the UK Gross Domestic Product (GDP) data due on Friday, which could influence expectations ahead of the BoE decision. Alongside GDP, markets will also assess Industrial Production, Manufacturing Production and Consumer Inflation Expectations.

Japanese Yen Price Today

The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the Australian Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.51%	-0.32%	-0.51%	-0.25%	0.17%	-0.10%	-0.84%
EUR	0.51%		0.19%	0.00%	0.26%	0.70%	0.42%	-0.33%
GBP	0.32%	-0.19%		-0.19%	0.07%	0.51%	0.22%	-0.52%
JPY	0.51%	0.00%	0.19%		0.27%	0.70%	0.40%	-0.32%
CAD	0.25%	-0.26%	-0.07%	-0.27%		0.43%	0.15%	-0.59%
AUD	-0.17%	-0.70%	-0.51%	-0.70%	-0.43%		-0.28%	-1.02%
NZD	0.10%	-0.42%	-0.22%	-0.40%	-0.15%	0.28%		-0.75%
CHF	0.84%	0.33%	0.52%	0.32%	0.59%	1.02%	0.75%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).