GBP/JPY resumes upside journey after a corrective move to near 161.20, BOE policy eyed

• GBP/JPY has attempted a rebound after a corrective move to near 161.20.
• The BOE is expected to elevate interest rates by 50 bps to 1.75%.
• Despite a less-hawkish commentary from the BOE, BOE-BOJ policy divergence is invincible.

The GBP/JPY pair has concluded its corrective move after printing a low of 161.20 in the Asian session and has resumed its upside journey. Earlier, the cross displayed a responsive buying action after printing a fresh monthly low of around 159.50 on Tuesday.

An interest rate decision by the Bank of England (BOE) will guide the next move in the asset. On Thursday, BOE Andrew Bailey will dictate the monetary policy and may announce a rate hike by 50 basis points (bps).

Taking into account the inflation rate at which the households in the UK are spending to cater to their needs and desires is 9.4%. Price pressures have not displayed any exhaustion sign yet and the market participants are expecting that the inflation rate could hit the two-digit figure going forward. Therefore, a rate hike by a quarter to a percent is unable to offset the multiplier effects of roaring inflation.

Well, subdued economic data and political instability have added troubles for BOE policymakers. The BOE is unable to tighten its policy significantly, which may push the consequences of higher inflation for a prolonged period.

On the Tokyo front, investors are worried over a further escalation in BOE-Bank of Japan (BOJ) policy divergence. BOJ Governor Haruhiko Kuroda is committed to spurting the growth rate in Japan and is addressing the same with an ultra-loose monetary policy on the loop. Although, the odds are favoring that the BOE won’t be extremely hawkish, however, an escalation of policy divergence is imminent.