British Pound recovers as Japanese Yen struggles to capitalize on Bank of Japan's hawkish rate hike
GBP/JPY rebounds after a short-lived pullback on Wednesday as traders digest the Bank of Japan's decision to raise interest rates. At the time of writing, the cross is trading around 215.10, recovering from an intraday low of 214.53.
The Japanese Yen (JPY) strengthened after the BoJ ended a three-meeting pause and raised its policy rate by 25 basis points (bps) to 1.00% from 0.75%, the highest level since 1995.
Deputy Governor Shinichi Uchida said the BoJ will "continue to raise the policy interest rate in response to developments in economic activity, prices and financial conditions."
Despite the hawkish messaging, the Yen has failed to gain traction. The muted reaction may reflect the BoJ's decision to moderate the pace of its balance-sheet reduction from April 2027 and the fact that real interest rates in Japan remain negative.
According to BBH, "the swaps curve price in 75% odds the BOJ hikes by a total of 50bps in the next twelve months. The bar for a more aggressive BOJ tightening path is high because almost all underlying CPI indicators eased further below 2% in April."
Geopolitical uncertainty is also keeping traders on the sidelines, as markets await the formal signing of the proposed US-Iran peace agreement.
Attention now turns to the Bank of England's (BoE) interest rate decision on Thursday, where policymakers are widely expected to leave the Bank Rate unchanged at 3.75% for a fourth consecutive meeting. Traders will closely watch the voting split and policy guidance for clues on the future path of interest rates.
Ahead of the decision, markets will first digest the UK's Consumer Price Index (CPI) and Producer Price Index (PPI) reports on Wednesday, followed by labor market data on Thursday.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
The AI boom may follow the path of the 19th-century railway bubble, and builders may not be the ultimate winners
Goldman Sachs analyst Bobby Molavi compared the current situation to the 19th-century British railway mania: 500 companies spent more than the nation's annual income building 8,000 miles of railway, with most early investors losing out, while the real beneficiaries were the later "passengers." He pointed out that the current AI craze is driven by both debt and momentum, and that the S&P 500’s forward P/E ratio of 18x is only "a bit cheaper." Whether the builders can retain value is uncertain, and history does not offer an optimistic answer.
If Anthropic's IPO goes smoothly and the stock price rises next week, then everything remains the same for AI. Otherwise, some companies will go bankrupt.
The shrinking valuations of two major giants have triggered a chain reaction—investors are adopting more conservative revenue multiples for AI startups and are directly halting high-valuation financing for companies with zero revenue. Multiple venture capital firms have advised their portfolio companies to lower valuation expectations and to quickly build up cash reserves. Market participants warn that the outcome of Anthropic’s IPO will be a barometer for the industry: if successful, the boom will continue; if it fails, some companies may face elimination.
After the Brazilian election, political discount deepens; Morgan Stanley remains bullish on Petrobras (PBR.US), focusing on fuel pricing and dividends
Morgan Stanley still maintains its most optimistic "Overweight" rating, but has lowered its year-end 2027 target price from $31 to $25.
Corning (GLW.US) receives initial "Buy" rating from Jefferies! AI factories driving a fiber optic rush, with a potential global supply gap of up to 30%
For Corning, the recent profit growth mainly comes from the expansion of AI clusters. As the number of optical links crossing cabinets and campuses increases, customers need to deploy more optical fibers within limited conduit and cabinet space, thus driving demand for high-density optical cables and connection systems.
Crypto prices
More
