GBP/JPY maintains position above 196.00 after recovering losses

• GBP/JPY trims its daily losses after the interest rate decision by the BoJ.
• BoJ raised the short-term rate target by 15 basis points to the range of 0.15%-0.25%, from 0%-0.1%.
• The Pound Sterling could struggle due to a potential BoE rate cut on Thursday.

GBP/JPY pares its intraday losses after the release of the Bank of Japan’s (BoJ) interest rate decision on Wednesday. The GBP/JPY cross trades around 196.20 during the Asian hours, with the Japanese Yen (JPY) loses ground despite the BoJ board members deciding to raise the short-term rate target by 15 basis points (bps) from the range of 0%-0.1% to 0.15%-0.25%.

Additionally, the BoJ decided to taper Japanese government bonds (JGB) buying to ¥3 trillion ($19.07 billion) per month from ¥6 trillion as of the first quarter of 2026. BoJ Press Conference will be eyed to gain more impetus on the Japanese policy trajectory.

Japan’s Chief Cabinet Secretary Yoshimasa Hayashi stated on Tuesday that the Bank of Japan and the government will closely coordinate. Hayashi emphasized that the BoJ will work closely with the government to implement appropriate monetary policies aimed at achieving the inflation target.

On the GBP front, traders continue to price in a potential rate cut by the Bank of England (BoE) on Thursday, which puts downward pressure on the Pound Sterling (GBP) and limits the upside of the GBP/JPY cross. Reuters reported nearly 58% odds that the BoE will lower its borrowing costs by 25 basis points (bps) to 5.0%.

Additionally, the US Federal Reserve (Fed) is expected to keep rates unchanged in July, with the decision due on Wednesday. However, there is growing anticipation of a rate cut in September, which is putting pressure on the USD and providing support for other riskier currencies like the British Pound.