GBP/JPY Falls Below The 20-Day Simple Moving Average After BoE's Decision

The GBP/JPY fell towards the 181.00 region on Thursday, primarily due to the JPY's strength in anticipation of a possible Bank of Japan (BoJ) adjustment. In contrast, following the Bank of England's (BoE) decision, the GBP weakened against the majority of its counterparts.

As anticipated, the BoE increased the policy rate by 25 basis points today, bringing the Bank Rate to 5.25 percent, with two members voting for a 50 basis point increase and one voting to maintain the Bank Rate at its current level.

In its statement, the Bank of England (BoE) acknowledged the potential hazards of inflation rising, particularly in relation to wage growth. In spite of this, the bank emphasised that its current monetary policy is restrictive, and Andrew Bailey believed that it is already having a "impact." They also stated that they would maintain a Bank Rate that was sufficiently restrictive for an extended period of time to return inflation to the target of 2% over the medium term. This suggests that the Bank of England may prepare the financial markets for a potential halt or rate cut.

In response to the decision, British yields are exhibiting a range of movements. The two-year rate decreased to 4.93 percent, while the five- and ten-year rates increased by more than one percent.

On the other hand, the JPY is trading with gains against the majority of its counterparts, primarily due to expectations of further adjustments to the Bank of Japan's (BoJ) Yield Control Curve (YCC) policy. The bank conducted an unanticipated bond-buying operation on Thursday, driving the yield on the 10-year Japanese bond to a nine-year high of 0.65%. These developments suggest a possible shift in monetary policy. In the interim, divergences in the BoE and BoJ's financial policies should drive the pair higher.