CFD Trading Rate Great Britain Pound vs Japanese Yen (GBPJPY)

• GBP/JPY surges to near 198.80 as BoJ didn’t provide a timeframe for interest rate hikes after keeping them steady at 0.25%.
• The BoJ is worried about potential risks from incoming US protectionism policies under the leadership of Donald Trump.
• Investors await the BoE policy in which the central bank is expected to leave interest rates unchanged at 4.75%.

The GBP/JPY pair rallies to near 198.80 in Thursday’s European session. The cross strengthens after the Bank of Japan’s (BoJ) monetary policy announcement in which the central bank left interest rates unchanged at 0.25%, as expected. Eight members of the Monetary Policy Committee (MPC) supported keeping interest rates steady, while policymaker Naoki Tamura, a known policy hawk, proposed raising them by 25 basis points (bps) to 0.5%.

BoJ Governor Kazuo Ueda acknowledged that incoming policies from United States (US) President-elect Donald Trump when he will take office could pose a risk to Japan’s economic outlook. Ueda kept doors open for interest rate hikes in 2025 as he said, "If the economy and prices move in line with our forecast, we will continue to raise our policy rate”. He refrained from committing a timeframe for policy adjustment.

Investors brace for more volatility in the Japanese Yen (JPY) as the National Consumer Price Index (CPI) data for November is lined up for release on Friday. The inflation report is expected to show that the National CPI, excluding Fresh food, accelerated to 2.6% from 2.3% in October.

Meanwhile, the Pound Sterling (GBP) performs strongly against a majority of peers ahead of the Bank of England’s (BoE) interest rate decision at 12:00 GMT. The BoE is widely expected to opt for leaving interest rates steady at 4.75%. Therefore, investors will focus more on BoE’s guidance on interest rates for 2025.

Out of the nine-member Monetary Policy Committee (MPC), only policymaker Swati Dhingra is expected to propose easing interest rates by 25 bps.

• GBP/JPY rose after the BoJ decided to keep the short-term rate target unchanged within the range of 0.15%-0.25%.
• BoJ Summary suggests that uncertainty surrounding Japan's economic and price outlook remains significant.
• The Pound Sterling appreciates as traders expect the BoE to maintain its current interest rates at 4.75% on Thursday.

GBP/JPY has halted its two-day losing streak, trading around 195.50 during the Asian session on Thursday. The GBP/JPY cross is appreciating as the Japanese Yen (JPY) struggles after the release of the Bank of Japan's (BoJ) decision to keep interest rates unchanged.

The Bank of Japan maintained its policy rate for the third consecutive meeting, keeping the short-term rate target within the range of 0.15%-0.25% after its two-day monetary policy review, in line with market expectations.

The Summary of the BoJ Policy Statement stated that Inflation is expected to reach a level broadly consistent with the BoJ's price target in the latter half of its three-year projection period, extending through fiscal 2026. However, uncertainty surrounding Japan's economic and price outlook remains significant. The impact of foreign exchange (FX) volatility on inflation could be more pronounced than in the past, owing to changes in corporate wage and price-setting behaviors.

The upside of the GBP/JPY cross is bolstered by the improved Pound Sterling (GBP), which could be attributed to the increased likelihood of the Bank of England (BoE) keeping interest rates unchanged later in the day while remaining focused on addressing elevated domestic inflation.

Data showed on Wednesday that the UK Consumer Price Index (CPI) rose by 2.6% year-over-year in November following 2.3% growth in October. Core CPI, excluding volatile food and energy items, increased 3.5% YoY in November, compared to a previous rise of 3.3%. Meanwhile, the annual services inflation steadied at 5%, below forecasts of 5.1% but above the BoE's estimate of 4.9%.

• GBP/JPY edges lower despite an expected increase in the UK inflation boosts expectations for the BoE to leave interest rates unchanged on Thursday.
• UK annual headline and core CPI rose by 2.6% and 3.5%, respectively.
• The BoJ is unlikely to raise interest rates on Thursday.

The GBP/JPY pair edges lower below 195.00 in Wednesday’s European session. The cross drops after the release of the United Kingdom (UK) inflation data for November, which showed that price pressures grew in line with estimates.

As measured by the Consumer Price Index (CPI), UK annual headline inflation rose by 2.6%, as expected, faster than 2.3% in October. Month-on-month headline CPI grew 0.1%, in line with estimates but slower than the former release of 0.4%. The core CPI – which excludes a few volatile items – grew at a faster pace of 3.5% than the former reading of 3.3% but slower than estimates of 3.6%.

An expected growth in the UK inflation adds to evidence that the Bank of England (BoE) will leave interest rates unchanged at 4.75% in the policy meeting on Thursday. According to market expectations, eight members of the Monetary Policy Committee (MPC) are expected to vote for keeping interest rates at their current levels. While one policymaker Swati Dhingra will vote for cutting borrowing rates by 25 basis points (bps) to 4.50%.

Meanwhile, the Japanese Yen (JPY) exhibits a muted price action as investors await the outcome of the Bank of Japan (BoJ) policy meeting on Thursday. The BoJ is expected to leave interest rates at 0.25%. Investors will pay close attention to BoJ Governor Kazuo Ueda’s press conference to know about whether and how much the central bank will raise key borrowing rates in 2025.

Investors will also look for cues about the likely impact of incoming tariff hikes by United States (US) President-elect Donald Trump on the economy.

• GBP/JPY turns lower for the second straight day, though it lacks follow-through selling.
• Reduced bets for aggressive BoE rate cuts in 2025 underpin the GBP and lend support.
• Expectations that the BoJ will keep rates steady keep the JPY bulls on the defensive.
• The technical setup supports prospects for the emergence of dip-buying at lower levels.

The GBP/JPY cross attracts some intraday sellers following an Asian session uptick to the 195.50 region and turns lower for the second successive day on Wednesday. Spot prices, however, remain close to a nearly four-week high touched on Tuesday and currently trade just below the 195.00 psychological mark as traders now look to the UK Consumer Price Index (CP) report for a fresh impetus. 

A stronger UK wage growth data released on Tuesday justified the need for the Bank of England (BoE) to keep rates on hold at its meeting on Thursday and forced investors to trim their bets for three 25 basis points rate reductions next year. This might continue to act as a tailwind for the British Pound (GBP). Furthermore, expectations that the Bank of Japan (BoJ) will not hike interest rates at the conclusion of the December policy meeting keep the Japanese Yen (JPY) bulls on the defensive and should act as a tailwind for the GBP/JPY cross. 

From a technical perspective, this week's breakout through the very important 20-day Simple Moving Average (SMA) was seen as a fresh trigger for bulls. Moreover, oscillators on the daily chart have just started gaining positive traction and are still away from being in the overbought territory. This, in turn, validates the near-term positive outlook for the GBP/JPY cross and supports prospects for the emergence of dip-buyers at lower levels. That said, failure near the 61.8% Fibonacci retracement level of the October-December fall warrants caution. 

Nevertheless, any further decline is more likely to find support near the 194.45 horizontal zone ahead of the 194.00 mark, or the 50% Fibo. level. Some follow-through selling could make the GBP/JPY cross vulnerable to accelerate the fall towards the 193.40 intermediate support en route to the 193.192.95 region and the 38.2% Fibo. level, around the 192.60-192.55 zone.

On the flip side, sustained strength and acceptance above the 195.50 area, or the 61.8% Fibo. level, will reaffirm the positive outlook and lift the GBP/JPY cross to the 196.00 round figure. The momentum could extend further towards the 196.65 hurdle en route to the 197.00 mark and the 78.6% Fibo. level, around the 197.30-197.35 region.

GBP/JPY daily chart

• GBP/JPY may regain its ground as the BoJ is widely expected to avoid a rate hike on Thursday.
• BoJ policymakers appear reluctant to tighten monetary policy further.
• The Pound Sterling remains subdued ahead of UK employment figures.

GBP/JPY halts its two days of gains, trading around 195.40 during the Asian hours on Tuesday. However, the downside of the GBP/JPY cross would be limited as the Japanese Yen (JPY) may depreciate amid the rising likelihood that the Bank of Japan (BoJ) may avoid an interest rate hike on Thursday.

The markets are currently pricing in less than a 30% chance of a BoJ’s rate hike in December. Several Bank of Japan (BoJ) policymakers seem in no hurry to tighten monetary policy further, given the minimal risk of inflation overshooting despite Japan's persistently near-zero borrowing costs.

Reports suggested the central bank sees "little cost" in delaying further tightening, preferring to wait for more evidence of wage growth before implementing additional policy adjustments. Japan's economy minister, Ryosei Akazawa, reaffirmed that the Bank of Japan and the government will collaborate on appropriate monetary policies.

Japan’s 10-year government bond yield rose to near 1.08% on Tuesday, mirroring the upward movement in US Treasury yields as speculation grew that the US Federal Reserve could signal fewer interest rate cuts for next year. However, the Fed is still widely expected to reduce borrowing costs by 25 basis points on Wednesday.

UK S&P Global/ CIPS Purchasing Managers’ Index (PMI) report showed that the overall business activity expanded at a steady pace to 50.5 in December. Meanwhile, the Manufacturing PMI declined at a faster pace to 47.3 from 48.0 in November. The Service sector activity expanded at a faster pace to 51.4, from the estimates of 51.0 and the former release of 50.8.

While the data indicated steady overall growth, survey respondents expressed concerns about the business outlook, citing fragile consumer confidence, tighter corporate budgets, and reductions in non-essential spending.

Traders are set to monitor the UK employment data on Tuesday, followed by the Consumer Price Index (CPI) inflation figures on Wednesday, ahead of the Bank of England's (BoE) rate decision on Thursday. The BoE is widely expected to maintain interest rates, with an anticipated eight-to-one vote split, as one notably dovish policymaker is likely to support a rate cut.

• GBP/JPY jumps to near 194.70 on steady growth in the preliminary UK Composite PMI data for December.
• The BoJ and the BoE are expected to leave interest rates unchanged on Thursday at 0.25% and 4.75%, respectively.
• This week, investors will also focus on the UK employment and inflation data for both the UK and Japan.

The GBP/JPY pair climbs to near 194.70 after the release of the S&P Global/CIPS United Kingdom (UK) PMI data for December. The report showed that the Composite PMI advanced at a steady pace to 50.5. Faster-than-expected expansion in service sector output neutralizes the impact of a sharp decline in manufacturing.

A steady growth in the PMI data has strengthened the Pound Sterling (GBP) against its major peers.

This week, investors brace for high volatility in the Pound Sterling’s price action due to the packed UK economic calendar. They will pay close attention to Tuesday’s employment data for the three months ending October and Wednesday’s Consumer Price Index (CPI) data for November, which will influence market speculation about the Bank of England’s (BoE) interest rate decision on Thursday.

According to market expectations, traders expect the BoE to leave interest rates unchanged at 4.75%, with a 7-2 vote split in which seven Monetary Policy Committee (MPC) members are expected to support a steady decision on key borrowing rates. BoE members Swati Dhingra and Deputy Governor Dave Ramsden are expected to support an interest rate reduction of 25 bps.

Investors will also pay close attention to BoE Governor Andrew Bailey’s press conference for fresh interest rate guidance for 2025. Traders see the BoE reducing interest rates three times next year.

Meanwhile, the Japanese Yen (JPY) is also expected to remain highly volatile this week as the Bank of Japan (BoJ) is scheduled to announce the last monetary policy decision of this year along with the BoE on Thursday. Investors expect the BoJ to keep borrowing rates steady at 0.25% as uncertainty over the likely global trade war due to higher import tariffs from incoming United States (US) President-elect Donald Trump has limited its potential of hiking them further.

This week, Japan’s National Consumer Price Index (CPI) data for November will also be released, a day after the policy decision.

• GBP/JPY remains subdued following the disappointing UK data for October.
• UK Gross Domestic Product contracted 0.1% MoM in October, against the expected increase of 0.1%.
• The JPY receives upward support from safe-haven flows amid a slight deterioration in global risk sentiment.

GBP/JPY continues to lose ground after the release of disappointing key economic data from the United Kingdom (UK), trading around 193.00 during the European hours on Friday. Office for National Statistics reported that the UK Gross Domestic Product (GDP) contracted 0.1% month-over-month in October, against the expected increase of 0.1%.

Meanwhile, Industrial Production fell 0.6% MoM following a previous decline of 0.5%, against the expected 0.3% rise. The monthly Manufacturing Production declined 0.6% in October, against the expected 0.2% increase and September’s 1% decline.

The downside risks for the British Pound (GBP) seem limited due to the increased likelihood that the Bank of England (BoE) will adopt a slower pace of policy easing compared to other central banks in Europe and North America.

The Japanese Yen (JPY) receives upward support from safe-haven flows due to a slight deterioration in the global risk sentiment, along with geopolitical tensions and trade war fears. However, this upside of the JPY is restrained due to the growing market conviction that the Bank of Japan (BoJ) will not raise interest rates at its upcoming policy meeting next week.

On Friday, the Bank of Japan's Tankan Large Manufacturing Index rose to the reading of 14 in the fourth-quarter period, marking the highest reading since March 2022. Furthermore, firms expect inflation to rise 2.4% a year from now.

• GBP/JPY rises over 0.20%, showing resilience ahead of key UK economic releases.
• Technical indicators suggest bullish momentum, with the pair navigating inside the Ichimoku Cloud.
• Key resistance at 200-day SMA of 194.74; support levels to watch include 193.95 and 100-day SMA at 192.53.

The Pound Sterling registered decent gains of over 0.20% against the Japanese Yen in early trading during Wednesday's North American session despite the lack of a catalyst boosting the former. The GBP/JPY trades at 194.46 after bouncing off daily lows of 192.49.

Price action remains slightly muted. Traders are awaiting the release of Gross Domestic Product (GDP) figures in the UK on Friday, which are expected to show an improvement in October’s figures.

GBP/JPY Price Forecast: Technical outlook

The GBP/JPY recovered after falling over 4.58% in mid-November, hitting its lowest level since September at 188.06. However, buyers lifted the exchange rate well inside the Ichimoku Cloud (Kumo), clearing key technical resistance levels like the Tenkan-Sen and the Kijun-Sen.

Momentum picked up, showing that bulls are in charge, as depicted by the Relative Strength Index (RSI), which turned bullish, with the slope aiming higher.

If GBP/JPY clears the 200-day Simple Moving Average (SMA) at 194.74, further upside is seen. The 50-day SMA is next at 195.06. A breach of the latter exposes the top of the Kumo at 196.20-40.

Conversely, if GBP/JPY tumbles below the confluence of the Kijun-Sen and the Senkou Span B at around 193.95, the next support would be the 100-day SMA at 192.53 before testing the bottom of the Kumo at 191.75-95.

GBP/JPY Price Chart – Daily

• GBP/JPY recovers daily losses ahead of the US inflation report.
• The JPY depreciates due to uncertain expectations for BoJ's further rate hikes.
• The Pound Sterling receives support from the increased likelihood of the BoE to keep its rates unchanged at 4.75% in December.

GBP/JPY recovers its daily losses and extends its gains for the third successive day, trading around 194.20 during the European session on Wednesday. However, the GBP/JPY cross faced challenges as the Japanese Yen (JPY) gained ground due to robust Producer Price Index (PPI) data, which suggested the possibility of further policy tightening by the Bank of Japan (BoJ).

The GBP/JPY cross may appreciate further, as the JPY struggles to maintain strong bullish momentum amid mixed sentiments surrounding the BoJ’s willingness to proceed with another rate hike in December.

While BoJ Governor Kazuo Ueda has suggested that the timing for the next rate hike is drawing closer, supported by robust underlying inflation data, dovish BoJ board member Toyoaki Nakamura has cautioned against raising rates prematurely, further fueling skepticism about the BoJ’s policy trajectory.

Moreover, the GBP/JPY cross regains its ground as the Pound Sterling (GBP) receives support from increased market confidence in the Bank of England (BoE) to keep its interest rates unchanged at 4.75% in December’s monetary policy decision.

BoE policymakers are anticipated to vote to keep interest rates unchanged, as UK headline inflation has risen again after briefly falling below the bank's 2% target. The central bank had previously forecasted a rebound in inflation following its temporary alignment with the target range.

Traders are likely to focus on the UK’s October monthly Gross Domestic Product (GDP) and Industrial and Manufacturing Production data. Economists anticipate growth in factory output and GDP following declines in September.

• GBP/JPY appreciates due to mixed expectations regarding the BoJ rate hike in December.
• BoJ board member Toyoaki Nakamura emphasized the need for caution in raising rates.
• BoE is widely expected to keep its current interest rates at 4.75% unchanged on December 19.

GBP/JPY extends its gains for the second successive session, trading around 193.10 during the European hours on Tuesday. The recent upward movement in the GBP/JPY cross is likely driven by a weaker Japanese Yen (JPY), stemming from mixed expectations regarding a potential Bank of Japan (BoJ) rate hike in December.

BoJ Governor Kazuo Ueda recently indicated that the timing for the next rate hike is nearing, bolstered by strong underlying inflation data in Japan. This has fueled speculation about a possible rate hike during the BoJ’s December 18–19 policy meeting.

However, conflicting media reports suggest the BoJ might forgo a rate hike this month. Adding to the uncertainty, dovish BoJ board member Toyoaki Nakamura has cautioned against premature rate increases, further weighing on the Japanese Yen.

The Pound Sterling (GBP) gains ground against its major peers as investors become increasingly confident that the Bank of England (BoE) will maintain its current interest rates at 4.75% in the monetary policy meeting on December 19.

Most BoE officials are anticipated to vote for an unchanged interest rate, as UK headline inflation has risen again after briefly falling below the bank's 2% target. The BoE had previously forecasted a rebound in inflation after it temporarily aligned with the desired range.

• GBP/JPY has fallen to a trendline for the August rally. 
• The pair is in a downtrend with odds favoring an extension lower. 

GBP/JPY is trying to pierce the trendline for the uptrend since the August lows. If it is successful and decisively breaches the trendline, it will suggest a follow-through lower to a fresh downside target at 186.20, the 61.8% Fibonacci of the down move prior to the trendline (blue rectangle on chart). 

The pair is now in a short and probably medium-term downtrend (since the October 31 high) and according to technical analysis lore trends have a tendency to extend, suggesting the odds favor even more downside to come.

GBP/JPY Daily Chart 

GBP/JPY is making its way down to the next target for the pair at around 189.56, the low of the Right-Angled triangle that formed in late September and early October. 

It is also possible it could bounce from the current level at the trendline which is a support level.

The Relative Strength Index (RSI) is not yet oversold which indicates the pair could still have further to fall before it gets oversold.  

A decisive breach of the trendline would be one accompanied by a long red candlestick that closed near its lows and well clear of the trendline, or three consecutive red candles that breached the level.

• GBP/JPY may appreciate as the BoE leans toward a gradual approach to policy easing.
• The Pound Sterling may gain ground as BoE officials support following a gradual policy-easing approach.
• The likelihood of a BoJ’s 25 basis point hike in December rose to nearly 60%, against 50% a week ago.

The GBP/JPY pair snaps its five-day losing streak, trading near 191.90 during Asian trading hours on Thursday. Economic data releases remain sparse for the United Kingdom (UK), with a similarly light calendar expected in the coming week.

As a result, the Pound Sterling (GBP) is likely to be influenced by market expectations regarding the Bank of England's (BoE) December interest rate decision. The GBP/JPY cross could find support as BoE officials lean toward a gradual approach to policy easing.

On Monday, during a speech at King’s Business School, BoE Deputy Governor Clare Lombardelli stressed the need for clearer signs of easing inflationary pressures before considering further rate cuts.

Deputy Governor Lombardelli also warned of the risks associated with inflation staying above the BoE’s target. She highlighted concerns about wage growth stabilizing at 3.5%-4.0% and the Consumer Price Index (CPI) lingering around 3% instead of the 2% target, which could present significant policy challenges.

The upside for the GBP/JPY cross may face headwinds as the Japanese Yen (JPY) finds support amid increasing expectations of another interest rate hike by the Bank of Japan (BoJ) as early as next month. Market sentiment has shifted, with the probability of a 25 basis point hike in December rising to approximately 60%, compared to around 50% just a week ago.

Additionally, BoJ Governor Kazuo Ueda recently hinted at the possibility of tightening monetary policy, highlighting concerns over the Yen's prolonged weakness. Investors are now closely watching Tokyo's inflation data, scheduled for release on Friday, as it could provide crucial clues regarding the BoJ's policy direction.

• GBP/JPY faces challenges as US President-elect Donald Trump's renewed tariff threats have dampened market sentiment.
• The Pound Sterling may gain ground due to the hawkish mood surrounding the BoE policy decision next month.
• BoE Deputy Governor Lombardelli requires more evidence of easing inflation before supporting another rate cut.

GBP/JPY continues its losing streak for the fifth successive session, trading around 191.10 during the European hours on Wednesday. Investors will focus on the Tokyo Consumer Price Index (CPI) data for October, which will be published on Friday.

The downside risk for the GBP/JPY cross appears due to the increased risk aversion following US President-elect Donald Trump's renewed tariff threats, which have dampened market sentiment, contributing support for the safe-haven Japanese Yen (JPY).

However, the upside of the JPY could be retrained as traders dial back expectations for the Bank of Japan (BoJ) to hike interest rates in December. Market participants expect that political uncertainty in Japan limits BoJ’s potential for raising its key borrowing rates further.

Last week, BoJ Governor Kazuo Ueda hinted last week at the possibility of another interest rate hike as early as December. Japanese Prime Minister Shigeru Ishiba said on Tuesday that he would ask companies to implement significant wage hikes at the annual "Shuntō" negotiations next spring.

The downside of the GBP/JPY cross could be limited as the Pound Sterling (GBP) receives support from reduced expectations that the Bank of England (BoE) will cut interest rates in December. Most BoE policymakers favor a gradual approach to easing monetary policy. Bank of England’s Financial Stability Report will be eyed on Friday.

BoE Deputy Governor Clare Lombardelli stated on Tuesday that she needs to see further evidence of cooling price pressures before endorsing another interest rate cut. Lombardelli also noted that US trade tariffs pose a potential risk to economic growth, though it is too early to fully gauge their impact.

• GBP/JPY has fallen consistently during November, weakening by seven Yen to the Pound.
• It may now be in a bear trend both in the short and medium term, suggesting the odds favor more downside still. 

GBP/JPY may have reversed both its short and medium-term uptrends after the last bout of weakness. If so, the pair could see more downside on the horizon since it is a principle of technical analysis that the odds favor extensions of trends.

GBP/JPY Daily Chart 

GBP/JPY began selling off on October 31 after it peaked at 199.81 on the preceding day. Since then it has staircased down, reaching a new low in the 192.80s on November 22 – seven whole Japanese Yen (JPY) to the Pound Sterling (GBP) lower than at the end of October.

It has also broken below all three major Simple Moving Averages (SMA), the 50, 100 and 200-day SMAs on a closing basis. 

The (blue) Moving Average Convergence Divergence (MACD) momentum indicator line has both crossed below the red signal line and below the zero level, and taken together these are  bearish signs.  

A break below the 192.80 level could open the way to further losses with the next target at around 189.56, the low of the Right-Angled triangle that formed in late September and early October. 

• GBP/JPY gains ground as the Bank of England may adopt a slower pace of policy easing.
• The Japanese Yen receives downward pressure from the uncertainty surrounding the BoJ rate hikes.
• Japan's Leading Economic Index was revised down to 109.1 in September, slightly below the anticipated 109.4.

GBP/JPY remains stable after a volatile session, trading near 194.20 during European hours on Monday. The Pound Sterling (GBP) finds support from market expectations that the Bank of England (BoE) may adopt a slower pace of policy easing. According to a Reuters report, traders anticipate the BoE will keep interest rates steady at 4.75% during its December meeting, with a projected 75 basis points (bps) cut to 4.00% by 2025. 

However, the British Pound faced headwinds on Friday following disappointing economic data. UK Retail Sales contracted more sharply than expected in October, while the flash S&P Global/CIPS Composite Purchasing Managers' Index (PMI) for November dropped below the 50.0 threshold for the first time since October 2023, signaling a contraction in economic activity.

The GBP/JPY cross could move upwards as the Japanese Yen (JPY) struggles due to uncertainty surrounding the Bank of Japan's (BoJ) future rate hikes and a prevailing risk-on market environment. BoJ Governor Kazuo Ueda has hinted at the possibility of another interest rate hike as early as December. Meanwhile, Prime Minister Shigeru Ishiba's administration is reportedly considering a $90 billion stimulus package aimed at mitigating the impact of rising prices on households.

Japan's Leading Economic Index was revised down to 109.1 in September, slightly below the anticipated 109.4. Despite this, the index marked an improvement from August's final reading of 106.9, the lowest since October 2020. Market focus now shifts to Tokyo's upcoming inflation and employment data, due later this week.

• GBP/JPY may depreciate as UK Retail Sales fell 0.7% MoM in October, exceeding the expected 0.3% decline.
• Reuters survey indicated that 56% of economists anticipate a BoJ rate hike in December.
• Governor Kazuo Ueda mentioned the possibility of further rate hikes, highlighting the Yen's impact on economic and price stability.

GBP/JPY remains steady around 194.50 during the early European hours, following the lower-than-expected UK Retail Sales figures for October released on Friday. Traders now focus on S&P Global UK Purchasing Managers’ Index (PMI) figures due later in the day.

UK Retail Sales dropped by 0.7% month-over-month in October, significantly exceeding the expected 0.3% decline and reversing the previous 0.1% increase. On an annual basis, Retail Sales grew by 2.4%, falling short of the anticipated 3.4% rise and the prior reading of 3.2%.

The GBP/JPY cross faced challenges during the Asian session as the Japanese Yen (JPY) gained ground following insights from a Reuters survey on expectations for the Bank of Japan (BoJ). According to the survey, 56% of economists anticipate the BoJ will raise interest rates at its December meeting, driven by the JPY’s depreciation and improving economic conditions.

Additionally, Governor Kazuo Ueda stressed the need to address Yen's impact on economic and price stability, suggesting the possibility of further rate hikes. Additionally, Prime Minister Shigeru Ishiba’s administration is considering a $90 billion stimulus package aimed at alleviating the burden of rising prices on households.

Recent data indicated that Japan’s National Consumer Price Index (CPI) slowed to a nine-month low of 2.3% year-over-year in October. Similarly, the annual core CPI, which excludes fresh food, also dropped to 2.3%, a six-month low, slightly above the forecast of 2.2%.

Additionally, the Jibun Bank Japan Services Purchasing Managers’ Index (PMI) increased to 50.2 in November, up from 49.7 in October, which had marked the lowest level in four months. However, the Manufacturing PMI unexpectedly fell to 49.0 in November, the lowest reading since March, down from 49.2 in October, missing market expectations of 49.5.

• GBP/JPY may depreciate further as daily chart analysis suggests a bearish bias.
• The nine-day EMA sits below the 14-day EMA, signaling continued weakness in short-term price momentum.
• The immediate support appears at the lower boundary of the descending channel at 193.50 level.

The GBP/JPY cross pares its recent gains, trading around 195.80 during the early European hours on Thursday. The daily chart analysis indicates that the pair is positioned within the descending channel pattern, suggesting a bearish bias.

The 14-day Relative Strength Index (RSI) is slightly below the 50 level, confirming bearish momentum. Additionally, the nine-day Exponential Moving Average (EMA) is positioned below the 14-day EMA, indicating persistent weakness in short-term price momentum.

On the downside, the GBP/JPY cross may navigate the region around the lower boundary of the descending channel at the 193.50 level. A break below this level would reinforce the bearish bias and put downward pressure on the currency cross to revisit the two-month low at the 189.56 level, which was recorded on September 30.

Regarding the upside, the immediate barrier appears at the nine-day EMA at 196.46 level, followed by the 14-day EMA at 196.63 level. Further resistance appears at the upper boundary of the descending channel at 197.70 level. A successful breach above this channel could cause the emergence of the bullish bias and support the GBP/JPY cross to test the four-month high at 199.81 level, reached on October 30.

GBP/JPY: Daily Chart

• GBP/JPY rises as a result of a mixture of higher-than-expected UK data and lower safe-haven flows into JPY. 
• UK inflation data beat expectations, increasing bets the Bank of England will leave interest rates at relatively high levels. 
• The differential between the two country’s interest rates – 4.75% for the UK and 0.25% for Japan, lends a bullish bias to the pair. 
   

GBP/JPY trades higher by about two-thirds of a percent in the 197.30s on Wednesday, after the release of higher-than-expected UK inflation data cemented bets the Bank of England (BoE) will leave its key bank interest rate at a relatively high 4.75% at its December policy meeting, and take a gradual approach to cutting interest rates in the future. Since higher interest rates usually increase foreign capital inflows thereby strengthening a currency, the news helped lift the Pound Sterling (GBP), and has led to a rise in GBP/JPY.  

The UK Consumer Price Index (CPI) inflation gauge rose by 2.3% year-over-year in October, well above the 1.7% of September, and expectations of 2.2%. Core CPI inflation rose by 3.3% YoY from 3.2% prior and 3.1% expected. 

After the CPI release, the market implied trajectory for UK interest rates showed the BoE’s bank rate would likely fall 15 basis points (bps) (0.15%) over the next three months and 60 pbs over the next 12 months. This suggests the chances of the BoE cutting by 25 bps in December are slim, according to Rabobank.

The Japanese Yen (JPY) meanwhile loses ground on Wednesday due to a reduction in safe-haven flows on the back of an improvement in risk appetite. The Yen had temporarily strengthened on Tuesday due to a ratcheting up of geopolitical risks. The source for this was Russia’s announcement that it had lowered the bar for the deployment of nuclear weapons. The move was interpreted as a warning in response to the US agreeing to allow Ukraine to use US-made missiles to strike targets in Russia. 

Uncertainty over when the Bank of Japan (BoJ) will next raise its key interest rate from a comparatively low 0.25% is capping upside potential for the Yen, whilst providing a boost for the GBP/JPY pair given the large differential which favors inflows into the Pound. 

On Tuesday Japan’s Finance Minister Katsunobu Kato said he is “closely watching FX moves with the utmost sense of urgency.” This suggests a risk that the authorities are planning an intervention to help support the Yen. However, according to Bloomberg News, the Yen is actually still relatively strong on a trade-weighted basis compared to the levels it fell to in July 2024 when the Japanese authorities last made a direct market intervention to prop up their currency. 

• GBP/JPY recovers further from over a one-month low set on Tuesday amid renewed JPY selling.
• Receding safe-haven demand, along with the BoJ uncertainty, undermines the safe-haven JPY. 
• The technical setup warrants caution for bulls ahead of the crucial UK consumer inflation data. 

The GBP/JPY cross is seen building on the previous day's strong rebound from the 193.60-193.55 area, or its lowest level since October 8 and gaining positive traction for the third consecutive day on Wednesday. The momentum lifts spot prices beyond the mid-196.00s during the Asian session and is sponsored by the emergence of fresh selling around the Japanese Yen (JPY).

Comments from Russian and US officials helped ease market concerns about the onset of a full-blown nuclear war. This, along with the uncertainty over the timing of further monetary policy tightening by the Bank of Japan (BoJ), undermines the safe-haven JPY. Meanwhile, hopes that the UK government’s fiscal stimulus to bolster domestic demand will lead to inflationary pressures and delay the Bank of England's (BoE) rate-cutting cycle offer some support to the British Pound (GBP). This further seems to act as a tailwind for the GBP/JPY cross.

That said, speculations that Japanese authorities might intervene in the FX market to prop up the domestic currency, coupled with geopolitical uncertainties, might hold back the JPY bears from placing aggressive bets. Investors might also refrain from placing aggressive directional bets around the GBP/JPY cross and opt to wait for the release of the latest UK consumer inflation figures. The crucial data will play a key role in influencing the broader sentiment surrounding the GBP and provide some meaningful impetus to the currency pair. 

From a technical perspective, the GBP/JPY cross showed some resilience below the 200-day Simple Moving Average (SMA) on Tuesday and the subsequent strength favors bullish traders. Moreover, oscillators on the daily chart have recovered from lower levels, though they are yet to confirm a positive bias. Hence, any further move beyond the 197.00 mark is more likely to confront stiff resistance near the 197.70-197.80 supply zone. Some follow-through buying beyond the 198.00 round figure, however, will set the stage for additional near-term gains.

On the flip side, the 196.00 mark now seems to protect the immediate downside, below which the GBP/JPY cross could slide to the 195.40-195.35 support en route to sub-195.00 levels. The latter represents the very important 200-day SMA, which if broken could drag spot prices back towards the overnight swing low, around the 193.60-193.55 zone, with some intermediate support near the 194.00 round figure.

GBP/JPY daily chart