GBP/JPY holds positive ground above 188.50 ahead of BoE rate decision

• GBP/JPY gathers strength around 188.65 in Thursday’s early European session. 
• The BoE will announce its interest rate decision on Thursday, with market participants widely expecting the rate to remain unchanged. 
• The markets expect no change at the September BoJ meeting, which concludes Friday.

The GBP/JPY cross trades in positive territory for the fourth consecutive day near 188.65 on Thursday during the early European session. The weakening of the Japanese Yen (JPY) drags the cross lower. The Bank of England (BoE) will announce its interest rate decision later on Thursday. On Friday, all eyes will be on the Bank of Japan (BoJ) monetary policy meeting. 

The BoE is expected to hold the interest rate at 5.0% at its September meeting on Thursday as UK Consumer Price Index (CPI) inflation remained at 2.2% in August, above the central bank’s 2% target. Rob Wood, chief UK economist at economic research consultancy Pantheon Macroeconomics, said the inflation data released on Wednesday gave the BoE “little reason to rush to cut interest rates again” on Thursday. 

The financial market expects the BoE to delay a second rate cut until November. However, if the UK central bank surprises a rate cut, it might cause the Pound Sterling (GBP) to weaken significantly.

The BoJ is anticipated to maintain its target range for short-term interest rates at 0% to 1% on Friday. “Since the BOJ decision is expected to remain unchanged, attention is likely to focus on Governor Ueda’s subsequent remarks,” said Rina Oshimo, a senior strategist at Okasan Securities Co. Additionally, Japan’s National Consumer Price Index (CPI) data will be closely monitored, as it might offer some hints about the BoJ’s future interest rate path.