GBP/JPY RISES TO MULTI-YEAR HIGHS AT 175.30 AMID DOVISH BOJ STANCE

GBP/JPY closes a four-consecutive week of gains soaring to its highest level since February 2016.

BoJ is expected to stick with yield curve control.

Yield divergence between gilts and Japanese bonds favours the GBP.

GBP/JPY has soared to its highest level since February 2016, closing a four-consecutive week of gains. This surge comes in the wake of a dovish stance taken by the Bank of Japan (BOJ), which is expected to stick with its yield curve control policy to keep long-term interest rates low. The yield divergence between UK gilts and Japanese bonds has further favoured the British pound adding to the momentum of the GBP/JPY pair.

BoJ dovish stance weight on the Yen

Bank of Japan (BoJ) officials, acknowledged that inflation has surpassed initial projections, which may result in upward revisions to the bank's inflation forecasts in the upcoming macroeconomic assessments. Despite this, the BoJ maintains a cautious stance and does not express confidence in achieving the sustainable 2% inflation target. Consequently, policymakers emphasize the ongoing need for continued monetary stimulus to support and stabilize the prevailing economic conditions.

On the other hand, rising yields amid the expectations of a rate hike from 4.5% to 4.75% on June 22 by the Bank of England (BoE) seems to be responsible for the GBP/JPY upwards momentum. In that sense, the British yields increased across the board with the 2.5-year yields seeing more than 1% increases on the session