GBP/JPY trims a part of intraday losses to its lowest level since April; BoE in focus

• GBP/JPY continues losing ground for the third successive day on Thursday.
• The BoE-BoJ policy divergence is seen as a key factor weighing on the cross.
• A positive risk tone helps limit further losses ahead of the key BoE decision.

The GBP/JPY cross remains under heavy selling pressure for the third straight day and drops to sub-191.00 levels or the lowest since April 23 on Thursday. Spot prices, however, manage to rebound a few pips and currently trade around mid-191.00s as traders prefer to wait on the sidelines ahead of the Bank of England (BoE) policy meeting.

Signs that inflationary pressures are receding globally have been fueling speculations that the UK central bank will cut interest rates later today. In fact, financial markets are pricing in over a 65% chance that the BoE will lower rates from a 16-year high of 5.25% and expect one more quarter-point cut before the end of the year. This, along with a strong pickup in the US Dollar (USD) demand, undermines the British Pound (GBP) and weighs on the GBP/JPY cross. 

The Japanese Yen (JPY), on the other hand, continues to draw support from the Bank of Japan's (BoJ) decision to hike the benchmark short-term rate on Wednesday, by 15 basis points - the top end of market expectations. Moreover, official data showed that Japanese authorities spent ¥5.53 trillion ($36.8 billion) intervening in the foreign exchange market in July, which further benefits the JPY and contributes to the offered tone surrounding the GBP/JPY cross. 

The fundamental backdrop, along with an intraday slide below the very important 200-day Simple Moving Average (SMA), suggests that the path of least resistance for spot prices is to the downside. Heading into the key central bank event risk, bearish traders seem reluctant to place fresh bets amid a positive risk tone, which tends to dent demand for the safe-haven JPY.