GBP/JPY Dips to Session Lows Near 207.50 at London Open as Yen Rallies Unfazed by Oil

The British Pound extends losses on Wednesday as the Japanese Yen rallies across the board, with investors bracing for a quarter-point rate hike by the Bank of Japan at next week’s monetary policy meeting. The GBP/JPY rebound from year-to-date lows at 207.10 was capped at the 209.00 area on Tuesday, and the pair retreated again on Wednesday, hitting session lows near 207.50 at the London session opening.

Oil not denting JPY; Bailey color

Higher crude prices, a traditional headwind for Yen rallies, have failed to dent JPY’s recovery. Brent oil is ticking down on Wednesday but remains near its highest levels in the last two months at $97.00, as the conflict in the Middle East widens.

In the UK, Bank of England Governor Andrew Bailey acknowledged on Tuesday that inflation risks “are on the upside,” but also vowed to dispel the idea that rate hikes are inevitable, with policy depending on economic and geopolitical developments. The Pound dropped against most peers following Bailey’s comments.

Strategists at Rabobank call September’s BoJ meeting pivotal for global funding dynamics — if the BoJ supports a more rapid pace of rate rises, markets may have to re-examine long-standing carry-trade assumptions.

This London-open stamp extends Tuesday’s GBP/JPY YTD low pack. Also Bailey MPR / GBP.

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