Sterling hits seven-month high above 170 yen

Sterling rose in European trade for the fourth straight session again yen, hitting seven-month highs after trespassing 170 yen on prospects of a widening policy gap between the UK and Japan. 

Bank of Japan is expected to increase interest rates by 25 basis points next week, while Bank of Japan has ruled out rate hikes in the forseeable future. 

GBP/JPY rose 0.7% to 172.09, the highest since October 2022, with a session-low at 170.93, after spiking 2.25% on Friday, the third profit in a row and the largest since October 2022 after Bank of Japan's meeting. 

Bank of Japan 

Recent US consumer prices and wages data show that inflationary pressures remain strong and there's a need for upcoming interest rates hikes following the expected May's 0.25% hike. 

Bank of England Governor Andrew Bailey said there might be a need for more UK rate hikes if signs of inflationary pressures insisted. 

Deutsche Bank raised its estimates for peak UK interest rates from 4.25% to 4.75%, which it means it expected an additional 0.25% hike following the May one. 

Bank of Japan 

Bank of Japan at its first meeting under new governor Kazuo Ueda maintained interest rates at the record low of minus 0.1%.

The BoJ also decided to maintain targets for 10-year treasury yields at zero, and overall maintaining policies unchanged to support economic recovery in the country.

The BoJ decided to conduct large-scale reviews for monetary easing measures in the next year.

The bank said that achieving price stability has proved challenging for the past 25 years, and that monetary easing policies impacted a wide sector of the economy and the financial sector.

The BoJ decided to remove future directives and pledges to maintain rates at current levels, while asserting it'll keep expanding the monetary base until consumer prices reach the 2% target.