GBP/JPY marches towards 162.50, downside remains favored ahead of BOE policy

• GBP/JPY is likely to face barricades around 162.50 as the BOE sees an interest rate hike by 25 bps.
• UK’s Inflation rate has climbed to 9.4% and further elevation is on the cards.
• The BOJ is highly focused to elevate wage rate hikes to keep the inflation rate above 2%.

The GBP/JPY pair has witnessed a mild upside momentum and is marching towards 162.50 gradually. On a broader note, the asset has turned sideways after a downside move in a range of 161.88-162.68. An inventory distribution after a downside move empowers a fresh bearish impulsive wave. The cross will remain on edge as investors have shifted their focus toward the interest rate decision by the Bank of England (BOE).

The BOE will announce its interest rate decision on Wednesday and a rate hike by 25 basis points (bps) is expected by the market participants. A quarter-to-a-percent rate hike decision by BOE Governor Andrew Bailey will lift the interest rates to 1.5%.

It is worth noting the price pressures are highest in the pound area and the BOE has turned slow in announcing interest rate hikes. Also, the BOE is the first central bank that increased its rates for the first time after the pandemic.

The inflation rate in the sterling zone has climbed to 9.4% and further acceleration to a two-digit figure is imminent as price pressures have not displayed any signs of exhaustion yet.

On the yen front, On the Tokyo front, the announcement of helicopter money by the Japanese Ministry of Finance to combat rising oil and food products prices has surprisingly strengthened the yen bulls. The agency has announced a budget reserve of 257 billion Japanese yen. The Bank of Japan (BOJ) is committed to keeping the inflation rate above 2% and is focusing on elevating wage rate hikes to keep the former above-desired levels.