• GBP/JPY rallied to over a two-week high after the BoE raised interest rate to 0.50%.
• The hawkish MPC vote distribution provided a strong boost to the British pound.
• Stronger USD weighed on the JPY, which further contributed to the bullish move.

The GBP/JPY cross caught aggressive bids after the Bank of England announced its policy decision and surged to a two-and-half-week high, around mid-156.00s in the last hour.

The British pound strengthened across the board after the BoE, as was widely expected, decided to hike the benchmark interest rate by 25 bps to 0.50% this Thursday. The hawkish surprise came from the vote distribution, where four MPC members voted for a 50 bps rate hike.

Adding to this, policymakers also voted 9-0 to start unwinding the £895 billion quantitative easing program by ceasing reinvestment, starting with the maturing of March 2022 gilts. This, in turn, was seen as a key trigger for bulls and provided a strong lift to the GBP/JPY cross.

On the other hand, the emergence of some US dollar buying weighed on the Japanese yen. This, along with the possibility of some short-term trading stops being triggered above the 155.75-155-80 region, accelerated the GBP/JPY pair's strong intraday positive momentum.

Market participants now look forward to the post-meeting press conference, where comments by the BoE Governor Andrew Bailey will be scrutinized for clues about the near-term policy outlook. This will influence the GBP and provide a fresh impetus to the GBP/JPY cross.

Technical levels to watch