Insights 
VT 
The GBP/JPY exchange rate remains stable with limited trading activity due to a public holiday in Japan. Traders are cautious ahead of the Bank of England’s interest rate decision on Thursday. The rate is currently around 202.41, slightly below the intraday high of 202.79.
Technical Analysis
Technical indicators show the pair rebounding after testing support near the 200.00 level, aligned with the 50-day SMA. This level serves as a support floor, maintaining the uptrend. However, the 21-day SMA at 202.81 poses resistance, hindering immediate upward movement. Overcoming this could lead the rate toward 204.00 and 205.00, the highest since July 2024.
On the downside, breaching the 200.00 support could trigger bearish pressure, targeting the October 3 high near 198.87. A daily close below that level may increase negative momentum, with the next support around 197.50. The Relative Strength Index (RSI) stands at 53, indicating a neutral stance in the overall bullish structure.
The Bank of England’s monetary policies influence the Pound broadly. Adjusting interest rates to control inflation can affect the currency’s value. In extreme cases, Quantitative Easing or Tightening may also impact the Pound depending on economic conditions.
With GBP/JPY holding around the 202.41 mark, we are in a holding pattern ahead of the Bank of England’s interest rate decision this Thursday. The pair is currently capped by resistance near 202.81, while the 200.00 level provides a very strong floor. This sets up a clear range for traders to watch for a breakout.
The upcoming Bank of England meeting is the key catalyst, especially since UK inflation data from October showed a stubborn rise to 2.9%, still well above the 2% target. This puts pressure on the central bank to maintain its hawkish stance, which supports the pound. Any signal that rates will stay higher for longer could easily push the pair through its immediate resistance.
Impact of Policy Divergence
On the other side of the trade, the Bank of Japan continues to be a source of yen weakness, reinforcing the pair’s underlying uptrend. At their meeting just last week, officials maintained their accommodative policy, justified by core inflation that remains below their target, last reported at 1.8%. This policy divergence is the primary reason why dips toward the 200.00 level have been consistently bought.
For those anticipating a hawkish surprise from the Bank of England, buying call options with a strike price just above 203.00 could be a capital-efficient way to trade a potential breakout. This strategy would profit from a decisive move toward the year-to-date highs near 205.00. We’ve seen similar setups lead to sharp rallies earlier in 2025 when UK economic data surprised to the upside.
Conversely, if the Bank of England signals a more dovish tilt due to slowing growth, the 200.00 support level will be critical. A break below this confluence zone could trigger a sharp decline. Traders could prepare for this by purchasing put options with a strike below 200.00, targeting a move towards the 198.87 area.
Given the binary nature of the upcoming announcement, implied volatility on GBP/JPY options has increased. This suggests traders could consider strategies like straddles or strangles to profit from a large price swing in either direction, without having to predict the outcome of the meeting. We are seeing implied volatility on one-week options for the pair reach levels not seen since the surprise rate hold back in August 2025.
