UK economists expect the GBP/USD exchange rate to retreat in the near-term outlook as steady BoE rates and doubts over the durability of hawkish policy guidance weigh on Pound Sterling.

The Pound to Dollar exchange rate (GBP/USD) traded around 1.3443 on Friday morning after gaining more than 1.3% over the previous two sessions.

GBP/USD closed Thursday at 1.3461, leaving the pair 1.6% higher for July but still below the month’s 1.3558 peak.

Rabobank expects that recovery to fade, forecasting Cable in a 1.32–1.33 range over the next one to three months.

The bank’s argument is that markets have already tightened UK monetary conditions on the Bank of England’s behalf by pricing further rate increases and pushing borrowing costs higher.

“In RaboResearch’s view, the heavy lifting done by the market may help the Bank avoid an actual hike in policy rates,” Rabobank said.

Thursday’s BoE decision reinforced that possibility. Bank Rate remained at 3.75%, despite three policymakers voting for an immediate increase.

The vote looked hawkish, but the majority still preferred to wait for clearer evidence that higher energy costs were feeding into wages and domestic prices.

Rabobank believes markets will initially continue “taking the BoE’s hawkish rhetoric at face value and maintain its expectations of rate hikes”.

The risk is that investors eventually demand action.

The bank questioned whether another unchanged decision could cause markets to doubt whether the Monetary Policy Committee is “truly focused on its inflation mandate”, particularly if policymakers continue talking tough without raising rates.

The latest Exchange Rates UK forecast survey poll, see chart above, broadly supports Rabobank’s near-term caution. The median bank projection falls to around 1.33 by the end of the third quarter before recovering gradually through 2027 and moving above 1.40 in late 2028.

Rabobank is less convinced about the Pound’s medium-term prospects.

“Further out we see risk that UK fiscal concerns will combine with steady BoE rates to weigh on the pound,” the bank said.

The UK labour market remains central to that view. Before the energy shock, weaker employment conditions had supported expectations that the BoE would cut rates this year.

Recent signs of stabilisation have complicated the picture and may increase the risk of “second order price effects” as oil prices rise again.

Rabobank said stronger labour data or “another ramp higher in UK CPI inflation data” could increase pressure on the Bank “to put its money where its mouth is”.

Near-Term GBP/USD Forecast: Rabobank Targets 1.32–1.33 as BoE Credibility Faces a Test

Rabobank’s range implies that Thursday’s move above 1.34 will not be sustained.

A decline to 1.33 would reverse much of the latest rally, while 1.32 would return Cable towards the lower part of its recent trading range.

The Dollar side is also important. Sterling benefited when short-term US yields and the greenback fell after the Federal Reserve held rates steady, but Rabobank does not view that as enough to secure a lasting Pound advance.

Its central judgement is that the BoE may continue using hawkish language while avoiding an actual increase.

That strategy can support Sterling only while markets believe a hike remains credible. Rabobank’s 1.32–1.33 forecast suggests that confidence will become harder to maintain.

Our currency coverage draws on live market data, official economic releases and published bank research.

• The US dollar plunged against the Japanese yen, with no real news other than the Bank of Japan clearly intervened.

• That being said, this presents a buying opportunity. The 200-day EMA has held as support. We plunged all the way back down to the 158 yen level.

• I’m perfectly comfortable adding to this position.

• This will be about the 3rd or 4th time they’ve intervened. Really all they can do is slowly try to put the brakes on the destruction of the yen.

Unfortunately for the Bank of Japan, they will have very limited ways to get this trend to change. Really the only way they could do it is if they hiked rates aggressively, but that would destroy the Japanese economy. So, this is a sign of desperation I’m more than willing to take advantage of. Keep your leverage reasonable, and it’s something that you can do.

Interest Rate Differentials and Bullish Trend Persistence

I have taken a hit today, but most of my positions go back months, and they’re not huge. Cumulatively they are big, but in general, this is a market that I believe continues to go higher. I think the USD/JPY pair hits the highs again. We’ve already played this movie a couple of times in the past. It will be a grind to the upside. It won’t necessarily be easy; this does tend to spook traders, it has a certain effect, but the trend will not change just based on one action from the Bank of Japan.

The interest rate differential alone continues to get you paid, and it’s interesting because we’ve seen rates in America all over the place, but they are so much higher than Japan that the break-even point is much wider than it is with other currencies. I like this pair, I still buy it, this offers value that I can take advantage of.

Want to trade our USD/JPY forex analysis and predictions? Here’s a list of forex brokers in Japan to check out.

Christopher Lewis is a technical analyst and market commentator at DailyForex with more than two decades of trading experience in Forex and other leveraged markets. Based in Columbus, Ohio, he specializes in chart-based analysis of major currency pairs, stock indices, commodities, and energy markets, focusing on clear support and resistance levels, trend structure, and risk management. Christopher produces daily written and video analysis for traders who rely on technical setups to navigate volatile market conditions

As seen on: Pairs Of Aces Podcast,The Trader Guy, FXEmpire

The EURJPY pair maintained its sideways movement below the resistance barrier at 187.40 during yesterday’s trading before reacting to the negative economic data. This led to a sharp bearish move, as the pair slipped below the ascending channel support at 185.65, suffering significant losses and reaching 182.45, before quickly rebounding to stabilize around 184.75.

For now, we will rely on the 185.40 level as an important additional resistance barrier. Repeated stability below this level would confirm the pair’s shift toward the bearish scenario, with the price expected to move lower toward 184.00, followed by an attempt to confirm a break below the support level at 183.95.

The expected trading range for today is between 184.00 and 185.30

Trend forecast: Bearish

MUFG expects USD/JPY to move back below 160 over time, with suspected intervention and faster Bank of Japan rate hikes increasing the risks for Dollar buyers.

The Japanese Yen rallied sharply on Thursday, with USD/JPY falling from close to 164 to below 158 before recovering above 160 in Asian trading.

The move came amid widespread speculation that Japanese authorities had intervened in the currency market ahead of the Bank of Japan meeting. Intervention was not officially confirmed, although reports also suggested that the US had conducted a rate check on USD/JPY.

US Treasury Secretary Scott Bessent added to the pressure by describing the Yen as “very undervalued”, while Japan’s top currency official Atsushi Mimura acknowledged concerns over the recent weakness without commenting directly on intervention.

MUFG said the scale of the move was similar to previous episodes of official action.

“The scale of the USD/JPY move is quite similar to past Yen selling interventions including in 2024, but may have a bit more to go based on historical experience of perhaps more than a 5% move,” the bank said.

USD/JPY fell by more than five Yen during Thursday’s session before recovering part of the decline.

MUFG remains cautious on the pair heading into the weekend, particularly with speculative positioning still heavily tilted against the Yen.

“With JPY net shorts still elevated close to all-time highs, authorities may be looking to flush out these positions,” the bank said.

It added that traders were likely to become “more cautious on the near-term bets on JPY given the balance of risks.”

That said, MUFG does not believe intervention alone will be enough to produce a lasting reversal.

“Ultimately it boils down to fundamentals over the medium term,” the bank said. “For USD/JPY to achieve a more durable retracement lower, it would require real interest rates to rise more substantially, and for market concerns around fiscal sustainability to be addressed.”

USD/JPY Forecast: MUFG Targets a Move Below 160

MUFG expects the Bank of Japan to leave rates unchanged at its latest meeting, although dissenting votes in favour of a hike could strengthen expectations of earlier tightening.

The bank’s global and Japan teams forecast BOJ rate increases in September 2026 and January 2027, a faster path than markets currently price.

“This in part underpins our view for USD/JPY to move lower below the 160 levels over time,” MUFG said.

Governor Kazuo Ueda’s guidance will now be closely watched for any indication that policymakers are becoming more willing to accelerate the pace of tightening.

USD/JPY remains well above its January levels despite the latest sharp reversal.

Our currency coverage draws on live market data, official economic releases and published bank research.