Societe Generale’s Kenneth Broux expects the Bank of England (BoE) to keep rates unchanged, warning of upside inflation risks, while markets are now pricing the next move as a hike. Money markets have shelved rate cuts entirely for this year and believe the next move is up, with December 2025 pricing at +21 basis points. Despite this, Societe Generale's house call remains for three cuts, based on their base case for a decline in Brent crude oil back to $70 per barrel. GBP/USD has been declining, facing resistance at the 50-day moving average near 1.3485/1.3500, and support at 1.3140 and 1.3000, the latter being last November's low. EUR/GBP is defending the February trough at 0.8610, with the 200-DMA near 0.8690 as a near-term hurdle [1].
Meanwhile, MUFG’s Senior Currency Analyst Lee Hardman reports the Japanese Yen is holding up better against the US Dollar as the Bank of Japan (BoJ) leaves the door open to an April rate hike and officials step up FX warnings. The BoJ’s updated guidance allows for another hike as soon as the next policy meeting in April, though Governor Ueda signaled decisions will be made meeting by meeting. Finance Minister Katayama reiterated Japan's preparedness to respond to FX moves at any time, indicating a high risk of intervention if USD/JPY rises above the 160.00 level, which recently hit a high of 159.87. The July 2024 high stands at 161.95. Governor Ueda highlighted that yen weakness and higher energy prices may boost inflation expectations, emphasizing the need to monitor FX impacts on prices. Despite the hawkish tone, MUFG notes that the BoJ’s stance is unlikely to reverse the broader yen downtrend alone [2].
Both central banks are signaling caution in their policy outlooks, with the BoE expected to hold rates while warning of inflation risks, and the BoJ keeping the option open for an April hike but not committing. Market participants are closely watching key technical levels in GBP/USD and USD/JPY, as well as the potential for intervention by Japanese authorities if currency volatility increases [1][2].
CONCLUSION
The Bank of England and Bank of Japan are both maintaining cautious stances, with the BoE expected to hold rates amid inflation concerns and the BoJ leaving the door open for an April hike. Markets are reacting to these signals, with GBP/USD and USD/JPY trading near key levels and intervention risks highlighted for the Yen. The overall sentiment is cautious, with central banks prioritizing inflation monitoring and flexible policy responses.