British Pound Spikes After BoE

The British pound spiked against the Japanese yen during the trading session on Thursday as the Bank of England hiked rates by 25 basis points. Furthermore, they suggested that there is going to be a runoff of the balance sheet, essentially quantitative tightening. Because of this, we saw the British pound reaches high as ¥156.50 almost immediately, but it must be said it seems to be hanging on by a thread and it is almost as if the markets are quite convinced of the bullish and is.

GBP/JPY Video 04.02.22

Keep in mind this pair is heavily influenced by a multitude of things outside of England. For example, the Japanese yen is considered to be a safe haven, and there are a lot of risks out there right now. Because of this, it does make a certain amount of sense that we would see trouble going higher on a sustainable path as interest rates and tightening monetary policy could put a damper on growth. Having said that, there are a lot of concerns beyond that as it seems like growth is decelerating at the same time.

Nonetheless, I do believe this is a market that will have to sort itself out one way or the other, so I believe that the jobs report in America could be the next catalyst for risk. If we did turn around a break below the ¥155 level, that would be an extraordinarily negative sign. At that point in time, I would probably be somewhat aggressively short of this pair. On the other hand, if we can break above the ¥157.50 level, that would show extreme strength then it would become a “buy-and-hold” type of market.

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