The outlook for the Bank of England and the Bank of Japan is a divergence that looks set to continue for the medium term. The UK’s economy is re-opening as Sonia futures are pricing in 3 10bps rate hikes next year. The Japanese economy remains under pressure and no interest rate hikes are expected for next year. Therefore, GBPJPY buyers should be favoured from their current fundamental outlook.

Over the last 10 years, the GBPJPY has risen 90% of the time between October 07 and December 07 with an average return of +4.69%. The largest gain was in 2016 with a 12.24% rise. The largest loss was in 2018 where it registered a -3.19% loss.

Major Trade Risks: Any slow down in the UK economic recovery/ bad Covid news for the UK will invalidate this outlook.