Yesterday’s Bank of England MPC meeting was unremarkable. Interest rates and asset purchases both remained the same. However, looking at the minutes, the BoE has adopted a more optimistic outlook for the UK economy. The Bank of England is expecting the country’s GDP to fall by less than forecast back in February with the low Covid case numbers and success of the vaccine rollout clearly playing a big part in this. Crucially, there is an expectation that the estimated £150 billion of savings that consumers have accumulated over the past 14 months or so will steadily be released into the economy in the months ahead.

The JPY should remain weak as the BoJ has no plans for tapering and are likely to keep interest rates at very low levels for some time.

Therefore, it is reasonable to expect GBPJPY buyers on pullbacks or breakouts.

Key Trade Risks:

• If there is a strong risk-off tone that will invalidate this outlook.
• If equity markets sell-off sharply this will also invalidate this outlook and strengthen the Yen.