Ella 
In early European trading on Tuesday, GBP/JPY was trading within a narrow range below the 183.00 area. Market participants are awaiting the Bank of England’s (BOE) interest rate decision on Thursday, followed by the Bank of Japan’s (BOJ) meeting on Friday. These key events can trigger market volatility. The pair is currently trading around 182.91, up 0.07% on the day.
Traders expect the Bank of England (BOE) to raise interest rates to 5.5% from 5.25% at its meeting on Thursday. Last week’s UK economic data supported Bank of England Governor Andrew Bailey’s statement this month that the Bank of England was closer to ending its tightening cycle. In addition, the Bank of England may face pressure to halt its interest rate hike cycle due to concerns that aggressive interest rate hikes will lead to a recession.
On the yen front, the Bank of Japan would rather wait until it becomes clearer whether Japan’s fragile economy can withstand slowing demand from the United States and China. Bank of Japan Governor Kazuo Ueda said last week that the central bank could exit its negative interest rate policy when it gets closer to its 2% inflation target and that they would have enough evidence by the end of the year to assess whether negative rates should remain in place.
At Friday’s meeting, the Bank of Japan is widely expected to maintain its short-term interest rate target of -0.1% and its 10-year bond yield target of around 0%. The market is waiting to see whether Bank of Japan Governor Kazuo Ueda will send a new signal on the timing of policy action at a press conference after the meeting.
Later this week, UK consumer price index for August is due to be released on Wednesday. Market participants will turn their attention to the Bank of England and Bank of Japan monetary policy meetings on Thursday and Friday respectively. Traders will be looking for GBP/JPY cross trading opportunities from these events.
