- GBP/JPY attracts some sellers on Tuesday and is pressured by a combination of factors.
- The UK political uncertainty and BoE easing expectations act as a headwind for the GBP.
- Rising geopolitical tensions benefit the JPY’s safe-haven status and weigh on the cross.
The GBP/JPY cross meets with some supply near the 211.35 area during the Asian session on Tuesday and stalls the previous day’s goodish rebound from the 209.00 mark, or a four-day low. Spot prices slide back below the 211.00 mark in the last hour, though the intraday downtick lacks bearish conviction.
The British Pound (GBP) continues with its relative underperformance on the back of domestic political uncertainty, especially after the Green Party’s landmark victory in the Gorton and Denton by-election. The outcome was seen as a major blow to the UK Prime Minister Keir Starmer’s ailing authority and sparked further questions over his leadership of the party. This, along with the Bank of England (BoE) easing expectations, undermines the GBP and acts as a headwind for the GBP/JPY cross.
In fact, BoE Governor Andrew Bailey said during his testimony before the Parliament’s Treasury Committee last week that there is scope for rate cuts amid expectations that inflation will return to the 2% target. In contrast, BoJ Governor Kazuo Ueda said last Thursday that the basic stance is to continue raising rates if the likelihood of our economic and price forecasts materializes. Apart from this, rising geopolitical tensions benefit the safe-haven Japanese Yen (JPY) and exert pressure on the GBP/JPY cross.
Meanwhile, data released last Friday showed that the core consumer inflation in Tokyo – Japan’s capital city – fell below the Bank of Japan’s (BoJ) 2% target for the first time since 2024. Adding to this, reports that Japan’s Prime Minister Sanae Takaichi had expressed reservations about additional monetary tightening during her meeting with the governor temper hopes for an immediate rate hike by the BoJ. This could act as a headwind for the JPY and offer some support to the GBP/JPY cross.
