GBP/JPY extends the rally to near 194.50 as BoJ keeps interest rate steady

• GBP/JPY gains momentum to near 194.40 in Wednesday's early European session, adding 0.20% on the day. 
• BoJ kept interest rates steady amid Trump's tariff threats. 
• BoE is likely to keep interest rates on hold at 4.5% on Thursday. 

The GBP/JPY cross extends its upside to 194.40 during the early European session on Wednesday. The (JPY) trades slightly weaker after the Bank of Japan (BoJ) decided to keep its policy rate unchanged at its March meeting on Wednesday. The attention will shift to the Bank of England (BoE) interest rate decision on Thursday.

The BoJ kept interest rates steady on Wednesday, as widely expected. The Japanese central bank noted in the statement that "Concerning risks to the outlook, there remain high uncertainties surrounding Japan's economy and prices, including the evolving situation regarding trade and other policies in each jurisdiction."

Market players will closely monitor the press conference by BoJ Governor Kazuo Ueda, which might offer some hints about the interest rate path in Japan. The swaps market is now pricing in nearly 71% chance of a hike by July and certainty by October.

The BoE is expected to keep interest rates on hold on Thursday and stick to its mantra of gradual moves amid the heightened economic uncertainty and mixed news on the UK's economy. The markets anticipate the UK central bank to leave its benchmark interest rate on hold at 4.5%, with the next cut likely in May, followed by further reductions in August and November, according to the majority of economists polled by Reuters last week. 

Policymakers will have to wait until the May meeting to discuss the measures taken by Finance Minister Rachel Reeves on March 26 to defend her fiscal rules, which are now under threat due to weaker-than-expected growth and higher borrowing costs.