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GBP/JPY continues to trade below 134.50 as BoE offers no surprises

  • Bank of England keeps the policy rate unchanged at 0.75% as expected.
  • BoE repeats rates would need to be raised if there is a smooth Brexit.
  • Bank of Japan refrains from lowering its policy rate.

After advancing to its highest level since late July at 135.66 on Wednesday, the GBP/JPY pair started to erase its gains today and failed to gain traction after the Bank of England (BoE) didn't offer any surprises in its monetary policy statement. As of writing, the pair was trading at 134.35, losing 0.65% on a daily basis.

No fireworks from the BoE

As expected, the BoE's Monetary Policy Committee today announced that it decided to hold the policy rate unchanged at 0.75% with a unanimous vote. "Rates would need to rise to a limited and gradual extend if there is a smooth Brexit and some recovery in global growth," the bank repeated in its statement. Regarding the possibility of a no-deal Brexit, the bank noted that it would need to balance inflation pressure from weaker sterling against slower growth.

Meanwhile, the UK's Office for National Statistics (ONS) today reported that retail sales in August contracted by 0.2% following July's growth of 0.4% and put the British pound under modest selling pressure during the European trading hours.

Earlier in the day, the Bank of Japan (BoJ) also kept its policy rate steady at -0.1% in a widely expected decision. Commenting on the policy outlook, BoJ Governor Kuroda noted that the bank maintains a pledge to ease policy without hesitation if there is a risk that the economy could lose momentum and fail to hit the price goal. Nevertheless, the JPY's reaction to these remarks was limited.

On Brexit-related headlines, a spokeswoman for the European Commission today announced that they have received the UK's written proposal and added that talks will continue in coming days.

Technical levels to watch for

 

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