The GBP/JPY cross has attracted some intraday sellers, pulling back from an Asian session high of 207.20 (a fresh high since July 2024) and marking its second consecutive day of decline. However, this downtick lacks strong bearish conviction, with spot prices holding above the mid-206.00s and still on track for a third week of significant gains.
The recent consumer inflation data from Tokyo confirmed sticky inflation, reinforcing hawkish Bank of Japan (BoJ) expectations. Reports earlier this week even suggested the BoJ might hike rates as early as next month. Furthermore, speculation of potential intervention by Japanese authorities to support the Yen (JPY) continues to act as a headwind for the GBP/JPY cross.
Conversely, the British Pound (GBP) is struggling to find buyers as the US Dollar (USD) aims to extend its overnight bounce. Moreover, increasing bets on a Bank of England (BoE) rate cut next month, a stark contrast to the BoJ’s hawkish stance, are capping GBP/JPY. That said, reduced uncertainty surrounding the UK budget and an upward revision to the UK’s 2025 growth forecast could temper aggressive GBP selling.
Specifically, the UK Office for Budget Responsibility (OBR) now forecasts 1.5% economic expansion this year (up from 1%), with Chancellor Rachel Reeves expressing confidence in exceeding growth forecasts. Meanwhile, concerns over Japan’s deteriorating fiscal condition (due to a large economic package) and a prevailing risk-on sentiment could limit the JPY’s safe-haven appeal. These factors suggest caution before concluding that GBP/JPY has definitively peaked.
