GBP/JPY nudges higher after BoE cut, BoJ decision in focus

• GBP/JPY edges higher as markets digest the Bank of England’s policy decision.
• BoE delivers a 25 bps rate cut, but a narrow 5-4 vote tempers dovish expectations.
• Focus turns to the BoJ, with a rate hike to 0.75% widely anticipated on Friday.

The British Pound (GBP) strengthens against the Japanese Yen (JPY) on Thursday in the initial reaction to the Bank of England’s (BoE) monetary policy announcement. At the time of writing, GBP/JPY trades around 208.40, edging modestly higher after finding support near an intraday low of 207.87.

As widely expected, the BoE cut its policy rate by 25 basis points to 3.75%, though the decision was not unanimous. The vote split 5–4, with four policymakers preferring to keep rates unchanged at 4.00%, underscoring lingering divisions within the Monetary Policy Committee.

In its Monetary Policy Summary, the BoE said the extent of further easing will depend on how the inflation outlook evolves, noting that the overall restrictiveness of policy has already declined after 150 basis points of rate cuts since August 2024. While policymakers continue to see scope for rates to move lower over time, they cautioned that future easing decisions are becoming a “closer call.”

Traders interpreted the decision as less dovish than the headline rate cut might suggest, with the narrow 5-4 split and policymakers’ caution on further easing tempering expectations for an aggressive easing cycle. As a result, market pricing shifted modestly, with investors paring back bets on additional BoE rate cuts, now seeing around 39 basis points of easing priced in for next year, down from roughly 69 basis points a day earlier.

Attention now shifts to the Bank of Japan’s (BoJ) interest rate decision on Friday, where policymakers are widely expected to raise the policy rate to 0.75% from 0.50%.