GBP/JPY breaks below 193.00 ahead of BoE’s interest rate decision

• GBP/JPY declines as the Japanese Yen strengthens, fueled by market expectations of a potential BoJ rate hike in 2025.
• The UK ILO Unemployment Rate held steady at 4.4% for the three months ending January, as expected.
• The BoE is expected to keep interest rates unchanged at 4.5% with a 7-2 vote split on Thursday.

GBP/JPY continues to slide for the second straight session, hovering around 192.80 during European trading hours on Thursday. The currency cross weakens as the Japanese Yen (JPY) gains traction, driven by market expectations of a potential Bank of Japan (BoJ) rate hike in 2025. On Wednesday, the BoJ kept its short-term interest rate target steady within the 0.40%-0.50% range.

The BoJ’s Monetary Policy Statement highlighted moderate economic recovery in Japan, despite some persistent weaknesses. Consumer spending is gradually improving, and inflation expectations are rising at a controlled pace. In a post-meeting press conference, BoJ Governor Kazuo Ueda reaffirmed that the central bank would adjust its policies to ensure the sustainable and stable achievement of its inflation targets.

Additionally, the GBP/JPY cross faces downward pressure as the Pound Sterling (GBP) weakens against major counterparts following the release of the UK labor market data. The Office for National Statistics (ONS) reported that the ILO Unemployment Rate remained at 4.4% for the three months ending January, in line with expectations and the previous reading.

UK Employment Change showed an increase of 144K new jobs during the same period, surpassing the 107K additions recorded in the three months ending December. Meanwhile, Average Earnings (excluding bonuses) rose by 5.9%, matching forecasts and previous figures.

Investors now turn their attention to the Bank of England’s (BoE) interest rate decision, expected later in the day. The BoE is widely anticipated to maintain rates at 4.5% with a 7-2 vote split. In its last policy meeting in February, the central bank lowered borrowing costs by 25 basis points.