GBP/JPY Drops as Traders Eye Central Bank Decisions

The British Pound has lost ground against the Japanese Yen ahead of central bank decisions from both the Bank of England and the Bank of Japan.

GBP/JPY slipped as broad Pound weakness offset subdued demand for the Japanese Yen, with traders trimming exposure before the BoE's interest-rate decision on Thursday. The cross currently trades around 217.84, down 0.23% on the day.

The BoE is widely expected to leave its benchmark interest rate unchanged at 3.75%, as the recent energy shock has had a relatively contained impact on UK inflation data. The Consumer Price Index fell to a 15-month low of 2.6% in June, but upside risks to inflation have not disappeared.

ING analyst Francesco Pesole said that if inflation remains contained, the BoE will leave rates unchanged for the rest of the year. However, he added that dovish repricing remains the clearest near-term risk for sterling, with markets pricing 38bp of tightening by year-end.