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: 2025.01.29
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GBP/JPY remains below 193.50 due to hawkish mood surrounding BoJ's policy outlook
World FX news
Breaking news
GBP/JPY remains below 193.50 due to hawkish mood surrounding BoJ's policy outlook
New
2025.01.29 17:20
2025.01.29 17:20
2025.01.29 17:20
- GBP/JPY inches lower as traders expect the BoJ to deliver more rate hikes in the future.
- BoJ reiterated its commitment to further rate hikes if the outlook presented at the January meeting unfolds as expected.
- The Pound Sterling faces challenges due to the potential risk of stagflation in the UK economy.
GBP/JPY surrenders its recent gains from the previous session, trading around 193.30 during the European hours on Wednesday. The Japanese Yen (JPY) strengthened against its peers amid increasing expectations that the Bank of Japan (BoJ) will continue raising interest rates. Minutes of the December Bank of Japan meeting released this Wednesday showed that members emphasized the need for cautious monetary policy adjustments.
Meanwhile, investors are more confident that the BoJ will continue its move toward normalization and deliver additional interest rate hikes in 2025. Last week, the BoJ reaffirmed its commitment to further rate hikes and adjustments to its monetary policy stance if the outlook presented at the January meeting unfolds as expected.
Further downside risks of the GBP/JPY cross seem possible as the Pound Sterling (GBP) could face challenges due to the increased likelihood of the risk of stagflation in the UK economy, driven by weakening labor demand and persistent inflation.
Traders are currently pricing in a 25 basis point (bps) rate cut in the Bank of England's (BoE) first monetary policy decision of 2025 on February 6, which would bring borrowing rates down to 4.5% amid the sluggish economic outlook.
On Tuesday, UK Prime Minister Keir Starmer gave optimistic remarks on the economy in a Bloomberg interview. Starmer emphasized that the Labour government's top priority is "growth" and noted that the economy is beginning to "turn around." He also highlighted the strong trade ties between the United States (US) and the UK, stating that "we've got a huge amount of trade with the United States already, and the base is there for even better trading relations. We need to build on that."
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called 'doves'. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called 'hawks' and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
Last updated
: 2025.01.29
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USD/CAD jumps to near 1.4550 as Donald Trump is poised to impose tariffs on Canada
The USD/CAD pair climbs to near 1.4550 in Friday's North American session.
New
2025.01.31 23:46Fed's Bowman: Future moves should that be cautious and gradual
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2025.01.31 23:00EUR/JPY surges to 161.00 after flash German inflation data
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2025.01.31 22:46Breaking: US core PCE inflation holds steady at 2.8% in December as expected
Inflation in the US, as measured by the change in the Personal Consumption Expenditures (PCE) Price Index, edged higher to 2.6% on a yearly basis in December from 2.4% in November, the US Bureau of Economic Analysis (BEA) reported on Friday.
New
2025.01.31 22:32GBP/USD support noted around 1.2390/95 - Scotiabank
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New
2025.01.31 22:19EUR softer as spreads widen - Scotiabank
The ECB cut its policy rate 25bps Thursday, as expected, Scotiabank's Chief FX Strategist Shaun Osborne notes.
New
2025.01.31 22:16CAD slips, but steadies on tariff news - Scotiabank
The Canadian Dollar (CAD) slid briefly in response to yesterday's tariff headlines, making a new cycle low against the USD near 1.46 before recovering slightly.
New
2025.01.31 22:13USD gains on Trump tariff threat - Scotiabank
Markets remain quite subdued despite President Trump indicating late yesterday that 25% tariffs on Canada and Mexico will be announced this weekend, Scotiabank's Chief FX Strategist Shaun Osborne notes.
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2025.01.31 22:10Germany annual CPI inflation softens to 2.3% in January vs. 2.6% expected
Inflation in Germany, as measured by the change in the Consumer Price Index (CPI), softened to 2.3% on a yearly basis in January from 2.6% in December, Destatis' flash estimate showed on Friday.
New
2025.01.31 22:04US Dollar adds to gains with tariff talk and PCE as main drivers
The US Dollar Index (DXY), which tracks the performance of the US Dollar against six major currencies, currently trades at 108.25 at the time of writing and is receiving quite a few tailwinds this Friday.
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2025.01.31 21:49Disclaimer:
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