GBP/JPY Sees Three Reasons for Rebound Ahead of Central Bank Meetings

The GBP/JPY currency pair is positioned for a potential rebound ahead of back-to-back central bank meetings in the UK and Japan. The Bank of England's hawkish bloc has limited room to retreat, with the majority voting for an unchanged policy rate. Meanwhile, the Bank of Japan may struggle to deliver new information on future rate hikes, as markets have already priced in a September increase.

According to data, Yen has risen sharply this month ahead of the BoJ's meeting on September 18, but the move appears more aggressive than the additional near-term tightening embedded in rates markets. A September hike from 1% to 1.25% is already fully priced, and the implied rate for the next meeting stands at approximately 1.28%, marginally above the level a single hike would produce.

Takuji Aida, a reflationist adviser to Prime Minister Sanae Takaichi, expects another increase in January 2027, followed by a return to a six-month pace. The BoJ's Governor Kazuo Ueda is expected to avoid committing to a timetable for another hike, which could lead to a sell-the-fact reaction if investors receive no clearer guidance.

The technical case for the GBP/JPY rebound is also independent of central bank analysis, with the currency pair forming a two-layer support structure. The first layer sits at 207.06, and a second, more important layer stands at 206.10, representing the 38.2% retracement of the entire advance from 184.3.