GBP/JPY Drops Below 194.50 as Traders Await BoE Rate Decision

GBP/JPY Drops Below 194.50 as Traders Await BoE Rate Decision

The GBP/JPY pair continues its downward trend for the third straight day, trading at 194.45 during early Thursday trading in Europe. A mix of Middle East geopolitical tensions and monetary policy uncertainty is pushing traders into safer currencies like the Japanese Yen (JPY) while the Pound Sterling (GBP) comes under pressure.

BoE Likely to Hold Rates Steady at 4.25%

All eyes are on the Bank of England’s (BoE) June policy meeting scheduled for later in the day. Most economists expect the BoE to leave interest rates unchanged at 4.25%, according to a Reuters survey of 60 forecasters. A potential rate cut is being priced in for August, with a second one possibly occurring by the end of the year.

“The Middle East tensions currently are adding to further economic uncertainty. We thus expect the Bank of England to hold rates steady this Thursday and only one further cut during this year,” said Monica George Michail, Associate Economist at the National Institute of Economic and Social Research.

Geopolitical Tensions Boost Yen Demand

Rising conflict in the Middle East, especially the escalating Israel-Iran crisis, is fueling demand for traditional safe-haven currencies like the JPY. Meanwhile, the uncertainty surrounding U.S. involvement and broader regional instability has added further downside risk to risk-sensitive currencies such as the GBP.

Related: WTI Oil Rises Above $74 as Iran-Israel War Intensifies

GBP/JPY Technical Outlook

• Current Price: 194.45
• Short-Term Bias: Bearish
• Support Levels: 193.80 / 193.00
• Resistance Levels: 195.00 / 195.75

Any escalation in geopolitical conflict or a more cautious tone from the BoE could drag GBP/JPY lower. However, diminishing expectations for BoJ rate hikes until 2026 may limit further JPY appreciation over the medium term.