GBP/JPY Price Forecast: Rebounds from four-month low of 188.00

• GBP/JPY recovers strongly to near 189.50 as investors digest BoE's dovish policy outlook.
• The BoE halved UK GDP growth for the year to 0.75%.
• BoJ Tamura sees interest rates rising to at least 1% by April 2026.

The GBP/JPY pair bounces back to near 189.50 in Friday's North American session after posting a fresh four-month low of 188.00 earlier in the day. The cross recovers strongly as the Pound Sterling (GBP) outperforms across the board, with investors starting to digest Bank of England's (BoE) dovish communication on the monetary policy outlook and downwardly revised Gross Domestic Product (GDP) forecasts for the year to 0.75% from 1.5% projected in November.

On Thursday, the BoE reduced its key borrowing rates by 25 basis points (bps) to 4.5%, as expected. However, the vote split was more dovish than what the market participants had anticipated.

Out of nine members-led-Monetary Policy Committee (MPC) committee, seven members voted in favor of an interest rate of 25 bps and two for 50 bps, including Catherine Mann, an outspoken hawk. Market participants have projected that eight members will support a reduction in interest rates, and one would vote for keeping interest rates steady.

Meanwhile, the Japanese Yen (JPY) underperforms its peers even though traders raised Bank of Japan (BoJ) hawkish bets after board member Naoki Tamura said that interest rates must increase at least 1% by the second half of the fiscal year beginning in April, Reuters reported. Tamura's hawkish guidance was based on the assumption that there will be broad-based pay increases, which would lift price pressures.

GBP/JPY discovers strong buying interest after diving to near the four-month low of 188.00. The outlook of the pair remains bearish as the 20-day Exponential Moving Average (EMA) is sloping downwards, which trades around 192.10.

The 14-day Relative Strength Index (RSI) slides into the 20.00-40.00 range, suggesting that the downside momentum is intact.

More downside would appear towards the September 18 low of 185.80 and the September 16 low of 183.77 if the pair breaks below the intraday low of 188.00.

On the flip side, a further recovery move above the February 4 high of 193.18 will drive the asset towards the January 24 high of 194.76, followed by the January 9 high of 195.90.

GBP/JPY daily chart