GBP/JPY surges to near 193.00 after BoE's monetary policy announcement

• GBP/JPY rallies to near 193.00 as the BoE retains a gradual and cautious easing path after cutting interest rates by 25 bps to 4.25%.
• Two BoE MPC members favored leaving interest rates steady at 4.5%.
• Bloating risks to Japan's economy have diminished BoJ hawkish expectations in the near term.

The GBP/JPY pair extends its intraday upside move to near 193.00 during the late European session after the announcement of the monetary policy by the Bank of England (BoE). The BoE lowered its interest rates by 25 basis points (bps) to 4.25%, as expected, for the fourth time in its current policy-easing cycle.

Theoretically, lower interest rates by the BoE bode poorly for the Pound Sterling (GBP). However, the British currency has strengthened as a few officials voted for leaving borrowing rates at 4.5%. Additionally, the BoE has maintained a "gradual and careful" approach to further monetary expansion and raised its Gross Domestic Product (GDP) forecast for the current year to 1% from 0.75% projected in February.

BoE Monetary Policy Committee (MPC) members Catherine Mann and Chief Economist Huw Pill favored leaving interest rates at 4.5%. Meanwhile, officials Swati Dhingra and Alan Taylor voted for a larger-than-usual interest rate cut of 50 bps.

Meanwhile, investors brace of more volatility in the Pound Sterling as United States (US) President Donald Trump is scheduled to announce a trade deal with the United Kingdom (UK) at 14:00 GMT, which what he referred as "highly respected country" in a post on Truth.Social on Wednesday. A report from "The New York Times" showed that the country is the UK.

On the Tokyo front, the Japanese Yen (JPY) underperforms across the board as investors doubt that the Bank of Japan (BoJ) will hike interest rates in the near term, given the US President Trump-led trade war risk.

The BoJ minutes of the March meeting in which the central bank left interest rates steady at 0.5% showed that officials warned of downside risks to the domestic economy, prompted by the US international policies. "Downside risks stemming from US policies had rapidly heightened and, depending on future developments in its tariff policy, it was quite possible that these risks would even have a significant negative impact on Japan's real economy," one BoJ member said, Reuters reported.

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