GBP/JPY falls to near 189.00 following the BoJ interest rates decision

• GBP/JPY halts its winning streak after the release of the BoJ interest rates decision.
• The Bank of Japan decided to hold its current interest rate at 0.15% at Friday’s meeting.
• Policymakers await August’s UK Retail Sales data to gather more insights into the developments in the UK economy.

GBP/JPY breaks its four-day winning streak, trading around 189.00 during the Asian session on Friday. The GBP/JPY cross faces challenges as the Japanese Yen (JPY) gains ground following the Bank of Japan (BoJ) policy decision on Friday, keeping its interest rate at 0.15%, as highly expected.

Additionally, Japan’s Consumer Price Index (CPI) increased to 3.0% year-on-year in August, up from 2.8% previously, marking the highest level since October 2023. Additionally, the Core National CPI, excluding fresh food, reached a six-month high of 2.8%, rising for the fourth consecutive month and in line with market expectations.

Japan’s Finance Minister Shunichi Suzuki stated on Friday that he “will continue to monitor and analyze the impact of the latest US rate cut on the Japanese economy and financial markets.” Suzuki added that the Federal Reserve Bank’s (FRB) perspective on the US economy aligns with the Japanese government’s view that the US economy is likely to expand.

In the United Kingdom (UK), the Bank of England (BoE) decided to maintain its interest rate at 5% on Thursday, as widely anticipated. The BoE had previously signaled the possibility of rate cuts earlier in the summer with a quarter-point reduction at the last meeting, but this move may have been premature.

Policymakers are now awaiting further developments in the UK economy before considering additional rate adjustments. On Friday, UK Retail Sales data for August will be closely watched, with expectations for the monthly rate to decline to 0.4% from 0.5%, while the annualized figure is anticipated to remain steady at 1.4%.

Out of the nine Monetary Policy Committee (MPC) members, BoE external member Swati Dhingra voted for cutting interest rates for the second consecutive time, while the remaining members supported maintaining rates at their current levels. Investors had anticipated that two MPC members would back a dovish policy decision.