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>>GBP/JPY outlook: sharp rally as PM Takaichi’s warning of a BOJ rate hike fuels market turbulence.

GBP/JPY outlook: sharp rally as PM Takaichi’s warning of a BOJ rate hike fuels market turbulence.

crypthub

about 8 hours ago

Market Reaction

The Japanese Prime Minister’s remarks on possible BOJ tightening sparked a swift yen sell‑off. GBP/JPY jumped about 1.8% during Asian hours, one of the largest moves this quarter. The pair broke the 188.50 resistance that had held for two weeks. Trading volume surged to roughly 245% of its 30‑day average.

Historical Sensitivity

The yen has consistently over‑reacted to BOJ policy cues in 2024‑25, with past pivots moving USD/JPY over 4% in three sessions. Similar volatility appears across yen crosses, ranging from 1.5% to 2.7% after BOJ hints. This pattern reflects Japan’s long ultra‑accommodative stance and the market’s carry‑trade exposure.

Fundamental Drivers

BoJ probability of a 10‑bp hike rose to 35% for April and 68% for June, signalling tightening ahead. The Bank of England holds rates at 4.75%, creating a 525‑bp differential that fuels capital into the pound. UK data show mixed signals—services growth, manufacturing contraction, core inflation at 3.2% and unemployment at 4.1%. The widening interest‑rate gap remains the chief catalyst for GBP/JPY moves.

Technical Outlook & Risks

Key support now sits at 188.50, with resistance at 190.00 and the 2024 high of 191.35. RSI reached 68 and ADX rose to 32, indicating a strong but not yet overbought trend. Risks include Asian geopolitical shocks, unexpected UK economic surprises, and possible BOJ intervention if yen moves become disorderly. Traders should watch upcoming BoJ and BoE communications, plus UK employment and wage data.