GBP/JPY drops below 160.00 to the lowest since September; down more than 700 pips
- GBP/JPY loses more than 4%, on worst day in months.
- Next medium-term support at 158.00.
- Japanse Yen soars across the board after the Bank of Japan’s decision.
The GBP/JPY cross is losing more than 700 pips on Tuesday amid a rally of the Japanese Yen following the Bank of Japan’s monetary policy announcement.
The decision of the Bank of Japan to raise the upper range of its yield curve control of the 10-year bond from 0.25% to 0.50% boosted the Japanese Yen, that is having one of the most significant gains in years. The announcement took markets by surprise, leading to a selloff in government bonds.
“Governor Kuroda stressed that the move did not represent tightening and that it was made to improve market functioning. While the policy rate was kept at -0.10%, speculation will grow for an eventual rate hike next year. We thought it was an H2 prospect but today’s move suggests it could happen as early as H1. Furthermore, given Governor Kuroda’s propensity for surprises, this hike could come under his watch rather than his successor’s”, explained analysts at Brown Brothers Harriman.
The Yen is rising by more than 4% against its main rivals on Tuesday. The GBP/JPY cross is down by more than 700 pips, on its way to the lowest daily close since September 29.
Recently the cross bottomed at 159.06 and it is hovering around 159.40. Before BoJ’s decision, it was trading at 166.70. On the downside, the next strong support area is seen around 158.00.