Ella 
GBP/JPY extended gains for a second day, trading higher around 184.00 during Wednesday’s Asian session. The pair may face headwinds due to the dovish stance of the Bank of England (BOE) coupled with recent hawkish comments from the Bank of Japan (BOJ).
Bank of England Governor Andrew Bailey said the bank is approaching the peak of its interest rate hike cycle, which shows that the Bank of England has indeed taken a more cautious stance recently. Despite persistent inflationary pressures, the Bank of England still faces a delicate balancing act as raising interest rates too aggressively could jeopardize the UK economy.
Central banks need to carefully weigh the trade-off between controlling inflation and ensuring economic health and stability. This balancing act has consequences for British Pound Sterling (GBP).
On the other hand, recent comments by Bank of Japan Governor Kazuo Ueda suggest that the central bank may eventually end its negative interest rate policy if data continues to improve at the end of the year. This weakens GBP/JPY.
However, it is worth noting that the Bank of Japan needs to be confident of achieving its 2% inflation target and wage growth before making major policy changes. While Japan’s inflation rate has exceeded the 2% target for some time, there are expectations that inflation may fall below the Bank of Japan’s target in the coming months.
This suggests that market expectations for an imminent interest rate adjustment may be premature. The central bank is likely to carefully assess economic conditions and inflation trends before making any major policy changes. These developments will have an impact on the Japanese Yen (JPY).
Market participants are awaiting July interim data from the United Kingdom (UK) due later in the day. The data, which includes Gross Domestic Product, Industrial Production and Manufacturing Production, may provide a clearer picture of the country’s economic activity.
