- GBP/JPY regains positive traction on Wednesday amid a modest JPY weakness.
- The BoJ rate-hike uncertainty, domestic political uncertainty undermine the JPY.
- Intervention fears help limit JPY losses and cap the cross ahead of BoE’s Mann.
The GBP/JPY cross attracts some dip-buying in the vicinity of the weekly low, around the 196.85-196.80 region, and reverses a part of the previous day's losses. Spot prices, however, remain confined in a familiar range and currently trade around the 197.30-197.35 area, up less than 0.15% for the day.
The Japanese Yen (JPY) continues with its relative underperformance amid the uncertainty about the Bank of Japan's (BoJ) rate-hike plans and turns out to be a key factor acting as a tailwind for the GBP/JPY cross. Investors now seem convinced that Japan's political landscape could make it difficult for the BoJ to tighten its monetary policy further. This, to a larger extent, overshadows a rise in Japan's Producer Price Index (PPI) by the highest annual rate since July 2023, reflecting sustained inflationary pressure.
However, speculations that Japanese authorities might intervene in the FX market to prop up the domestic currency and a softer risk tone help limit losses for the safe-haven JPY. The British Pound (GBP), on the other hand, struggles to gain any meaningful traction on the back of mixed UK employment details on Tuesday. This, in turn, might hold back traders from placing aggressive directional bets around the GBP/JPY cross, warranting some caution before positioning for any further appreciating move.
Market players now look forward to a scheduled speech from the Bank of England’s (BoE) Monetary Policy Committee external member Catherine Mann for some impetus. Apart from this, the broader risk sentiment might influence demand for the safe-haven JPY and contribute to producing short-term trading opportunities. Nevertheless, the mixed fundamental backdrop makes it prudent to wait for a sustained move in either direction to confirm the near-term trajectory for the GBP/JPY cross.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD stays vulnerable near 1.0600 ahead of US inflation data
EUR/USD remains under pressure near 1.0600 in European trading on Wednesday. The pair faces headwinds from the US Dollar upsurge, Germany's political instability and a cautiou market mood, as traders look to US CPI data and Fedspeak for fresh directives.
GBP/USD trades with caution below 1.2750, awaits BoE Mann, US CPI
GBP/USD trades with caution below 1.2750 in the European session on Wednesday, holding its losing streak. Traders turn risk-averse and refrain from placing fresh bets on the pair ahead of BoE policymaker Mann's speech and US CPI data.
Gold price holds above $2,600 mark, bulls seem non committed ahead of US CPI
Gold price staged a modest recovery from a nearly two-month low touched on Tuesday. Elevated US bond yields and bullish USD cap gains for the non-yielding XAU/USD. Traders now look forward to the key US Consumer Price Index report a fresh impetus.
US CPI data preview: Inflation expected to rebound for first time in seven months
The US Consumer Price Index is set to rise 2.6% YoY in October, faster than September’s 2.4% increase. Annual core CPI inflation is expected to remain at 3.3% in October. The inflation data could significantly impact the market’s pricing of the Fed’s interest rate outlook and the US Dollar value.
Forex: Trump 2.0 – A high-stakes economic rollercoaster for global markets
The "Trump trade" is back in full force, shaking up global markets in the aftermath of the November 5th U.S. election. This resurgence has led to substantial shifts in both currency and bond markets, with the U.S. dollar index (DXY) jumping 2.0% + since election day.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.