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

• GBP/JPY trades lower on Friday after Japanese GDP data beats expectations and data for the same period from the UK. 
• Volatility is tempered by markets' view that the data is not sufficiently game-changing for either currency in the pair. 
• Much may hinge on BoJ Governor Ueda’s speech on Monday, the wide interest-rate differential supports GBP in the long run. 

GBP/JPY trades lower by about a third of a percent, in the 197.10s on Friday, after the release of weak UK economic growth data led to a depreciation of the Pound Sterling (GBP). The Japanese Yen (JPY) conversely was buoyed by better-than-expected Gross Domestic Product (GDP) and Industrial Production data which renewed hopes that the Bank of Japan (BoJ) will raise interest rates at its December policy meeting. 

UK GDP data for the month of September actually fell 0.1% MoM and rose only 0.1% in the whole of the third quarter (QoQ). This was below estimates and prior readings. The quarterly data showed a marked decceleration from a growth rate of 0.5% in Q2. 

In Japan, meanwhile, GDP grew at a slightly faster rate of 0.2% in Q3, in line with estimates of 0.2% but lower than the 0.5% of Q2. 

On an annualized basis, Japanese GDP rose by 0.9% in Q3, beating expectations of 0.7% but below the revised-down 2.2% of Q2. Japanese Industrial Production rose by 1.6% MoM beating estimates and previous figures. 

Although the data from Japan was higher than the UK data (0.2% vs. 0.1% in Q3) and beat estimates, whilst the UK figures undershot them, the difference may not be enough to be game-changing for either currency, according to institutional analysts. 

Remarking on the UK GDP figures, advisory service Capital Economic’s Deputy Chief UK Economist Ruth Gregory said it did not change her expectations that the Bank of England (BoE) would keep interest rates unchanged at 4.75% in December. Since higher interest rates attract greater net capital inflows this is good news for the  Pound. 

The economy grew at “..a snail’s pace (in Q3),” said Gregory, “However, this doesn’t mean the UK is on the cusp of another recession. And while today’s data raises the chances the Bank (BoE) will cut rates again in December, we are sticking to our view that the Bank will keep rates unchanged at 4.75% in December before cutting rates by 25 basis points again in February.” 

According to Comerzbank’s FX Analyst Volkmar Baur, the Japanese GDP data – though good – was not good enough to warrant an expectation that the Bank of Japan (BoJ) will raise its interest rate from 0.25%, the lowest in the developed world. 

“All in all, the GDP figures do not paint a picture of an economy gaining momentum or in danger of overheating, which would require a tightening of monetary policy,” said Baur, adding that whilst he had previously assumed the BoJ would raise interest rates by 0.25% in December, he now saw “a clear risk to this assumption”.

Baur highlights several reasons why he was unimpressed by the Japanese GDP data. Firstly the previous quarter’s figures were revised down substantially – from 0.7% to 0.5% QoQ and from 2.9% to 2.2% on an annualized basis. Due to this downward revision the overall picture is one of a “growth trajectory” that “appears weaker than previously thought.” 

Secondly, much of the growth came from “Inventory accumulation” which is a component that “tends to balance out over time,” adds Baur. 

Thirdly, the weakness from the external sector was concerning and could be a source of more fragility to come: “A US trade war focused on China would not leave Japan unscathed, as it is an important trading partner of China,” says the analyst. 

Much of the focus for the Yen will not be on Kazuo Ueda’s much-anticipated speech on Monday, when traders are hoping for a clearer sign the BoJ will be committing to an interest rate hike. In the meantime, the yawning gap between the interest rates in the two countries is expected to favor inflows into Sterling, giving GBP/JPY a positive upside bias overall.

• GBP/JPY remains under pressure ahead of a speech by BoE Governor Andrew Bailey scheduled for Thursday.
• The Pound Sterling may gain support due to increasing concerns among BoE officials about persistent price pressures.
• BoJ’s Uchida urged financial institutions and authorities to be prepared for sudden deposit outflows due to digitalization and technological advancements.

GBP/JPY edges lower after posting gains in the previous session, hovering around 197.50 during European trading hours on Thursday. Traders await a speech from Bank of England (BoE) Governor Andrew Bailey at the annual financial and professional services dinner later in the day.

However, the downside of the Pound Sterling (GBP) could be restrained due to rising concerns among BoE officials about persistent price pressures. On Wednesday, BoE Monetary Policy Committee external member Catherine Mann participated in a panel at the BNP Paribas Global Market Conference, where she noted that monetary policy is affecting inflation more quickly than economic theory suggests. This allows the central bank to hold off on significant interest rate cuts for now.

The Japanese Yen (JPY) continues to face pressure as political uncertainty in Japan raises concerns about the Bank of Japan's (BoJ) rate-hike plans. Additionally, worries over the potential impact of US President-elect Donald Trump's proposed trade tariffs on the Japanese economy are further undermining the JPY.

On Thursday, BoJ Deputy Governor Shinichi Uchida highlighted the need for financial institutions and authorities to be prepared for sudden deposit outflows due to digitalization and technological advances.

BoJ’s Uchida also noted the growing presence of non-bank financial institutions, which now account for nearly half of global financial intermediation. As the relationship between non-bank financial institutions and the banking sector strengthens, any deterioration in the non-bank sector could ripple through the entire financial system via market channels.

• 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.

• GBP/JPY attracts fresh sellers on Tuesday and is pressured by a combination of factors.
• Intervention fears underpin the JPY, while a bullish USD continues to weigh on the GBP.
• The BoJ uncertainty and the BoE’s hawkish tilt could limit losses ahead of UK jobs data.

The GBP/JPY cross meets with a fresh supply following an Asian session uptick to levels just above the 198.00 mark and reverses a major part of the previous day's move up. Spot prices currently trade around the 197.00 mark, down over 0.35% for the day, as traders now look forward to the UK monthly employment details for a fresh impetus.

The UK Office for National Statistics (ONS) is expected to report that the number of people claiming unemployment-related benefits rose to 30.5K in October, from 27.9K, and the jobless rate edged higher to 4.1% during the three months to September. Investors will also pay close attention to the wage growth data, which might influence expectations about the Bank of England's (BoE) policy decision in December. This, in turn, will provide some meaningful impetus to the British Pound (GBP) and the GBP/JPY cross. 

In the meantime, speculations that Japanese authorities might intervene in the FX market to prop up the domestic currency, along with fears about US President-elect Donald Trump's protectionist tariffs, underpin the Japanese Yen (JPY) and exert pressure on spot prices. Any meaningful JPY appreciating move, however, seems elusive on the back of uncertainty over the Bank of Japan's (BoJ) rate-hike plans. Apart from this, the BoE's hawkish tilt could offer support to the GBP and help limit the downside for the GBP/JPY cross. 

Even from a technical perspective, the recent breakout above the very important 200-day Simple Moving Average (SMA) favors bullish traders and supports prospects for the emergence of some dip-buying at lower levels. This further makes it prudent to wait for strong follow-through selling before confirming that the GBP/JPY cross has topped out and positioning for a deeper corrective decline in the near term.

• GBP/JPY appreciates due to uncertainties regarding the future BoJ interest rates outlook.
• LDP’s Shigeru Ishiba has been re-elected as Japan's Prime Minister, securing 221 of the 465 votes in the lower house of parliament.
• BoE’s Bailey emphasized that monetary policy will remain tight until the risks of persistent inflationary pressures are reduced.

GBP/JPY breaks its two days of losses, trading around 197.90 during the European session on Monday. The Japanese Yen (JPY) faces challenges due to uncertainty surrounding the Bank of Japan’s (BoJ) interest rate hikes in the future. The BoJ Summary of Opinions for the October meeting highlighted divisions among policymakers regarding the timing of future interest rate hikes.

Some members of the Bank of Japan expressed concerns about global economic uncertainties and rising market volatility, particularly around the Yen's depreciation. Still, the central bank has suggested it might increase its benchmark policy rate to 1% by the latter half of the 2025 fiscal year.

Liberal Democratic Party’s (LDP) Shigeru Ishiba has been re-elected as Japan's Prime Minister, receiving 221 out of 465 votes in the lower house of parliament. This follows last month’s election, in which Ishiba’s LDP, along with its coalition partner Komeito, lost their parliamentary majority.

The Bank of England (BoE) lowered interest rates by 25 basis points on Thursday. BoE Governor Andrew Bailey noted that, if the economy develops as anticipated, interest rates will continue to decrease gradually. However, Bailey stressed that monetary policy will remain tight until the risks of persistent inflationary pressures are reduced.

The Office for Budget Responsibility recently revised its inflation forecast for 2025, raising it to an average of 2.6%, up from the 1.5% estimate in March. This adjustment is closely aligned with the BoE’s August projections, which forecast inflation at 2.4% in one year, 1.7% in two years, and 1.5% in three years.

• GBP/JPY seesaws between tepid gains/minor losses as traders keenly await the BoE policy decision.
• Fears of a possible government intervention offer support to the JPY and caps the upside for the cross.
• The BoJ rate-hike uncertainty, along with the risk-on environment, keeps a lid on the safe-haven JPY.

The GBP/JPY cross retreats a few pips after touching a one-week high, around the 199.55 region during the Asian session on Thursday, albeit it lacks follow-through selling. Spot prices currently trade just above the 199.00 mark, nearly unchanged for the day as traders look to the Bank of England (BoE) policy decision before positioning for the next leg of a directional move.

The UK central bank is widely expected to focus on a longer-term picture of slowing inflation and vote to cut interest rates by 25 basis points (bps) for the second time this year. The focus, however, will be on the BoE's forward guidance amid concerns that the expansive Autumn Budget introduced by Chancellor Rachel Reeves would boost inflation. Hence, the release of the final Monetary Policy Report for 2024, along with the BoE Governor Andrew Bailey's remarks at the post-meeting press conference, will influence the British Pound (GBP) and provide a fresh impetus to the GBP/JPY cross.

Heading into the key central bank event risk, some verbal intervention by Japanese authorities offers support to the Japanese Yen (JPY) and acts as a headwind for the currency pair. Japan's chief cabinet secretary Yoshimasa Hayashi reiterated on Wednesday that the government intended to closely watch moves in the FX market, including speculative moves, with a higher sense of urgency. Adding to this, Atsushi Mimura, Japan’s Vice Finance Minister for International Affairs and top FX official, said on Thursday that the government is ready to take appropriate actions for excess FX moves if necessary.

That said, doubts over the Bank of Japan's (BoJ) ability to hike interest rates further in the wake of the political uncertainty in Japan and the prevalent risk-on mood continues to undermine the safe-haven JPY. This, in turn, supports prospects for an extension of the GBP/JPY pair's recent move-up witnessed over the past week or so. Bulls, however, need to wait for some follow-through buying beyond the 199.70-199.80 region, or over a three-month high touched last week before placing fresh bets.

• GBP/JPY may appreciate further as the BoE is highly expected to deliver a 25 basis points rate cut on Thursday.
• The Office for Budget Responsibility revised its 2025 inflation forecast to 2.6% from March's 1.5% estimate.
• BoJ Meeting Minutes indicated that board members largely agreed to continue to raise interest rates.

GBP/JPY extends its gains for the second successive session, trading around 198.30 during the European hours on Wednesday. However, the upside potential for the GBP/JPY cross seems possible as the Bank of England (BoE) is projected to lower interest rates by only 25 basis points on Thursday.

Investor expectations now point to fewer rate cuts in 2024 compared to projections made before last week’s budget announcement. The Office for Budget Responsibility recently revised its 2025 inflation forecast, increasing it to an average of 2.6% from March's 1.5% estimate. This update aligns closely with the BoE’s August forecast, which projects inflation at 2.4% in one year, 1.7% in two years, and 1.5% in three years.

Investors will closely monitor BoE Governor Andrew Bailey's press conference for insights into how the FY2025 budget might influence inflation expectations and shape monetary policy decisions in December.

The downside for the Japanese Yen (JPY) is expected to be limited, influenced by the hawkish tone in the minutes from the Bank of Japan’s (BoJ) recent meeting. The minutes showed broad agreement among board members to continue raising interest rates, as inflation and economic conditions appear to support the central bank's policy objectives.

The Jibun Bank Japan Services Business Activity Index fell to 49.7 in October, down from 53.1 in September, signaling a decline in services activity. This marks the first contraction since June, although it was marginal, with companies reporting slower sales.

• GBP/JPY may have reversed trend following the steep decline on October 31. 
• More downside will likely find support at major moving averages, momentum is bearish. 

GBP/JPY rose up after breaking out of the Right-Angle Triangle it formed during October and reached the minimum price expectation for price pattern, at 199.59, the 61.8% Fibonacci extension of the height of the Triangle at its widest point, higher (blue-shaded rectangle). 

GBP/JPY 4-hour Chart 

GBP/JPY was in an established short and medium term uptrend as it rose following the break out, however, since the sell-off of October 31, the short-term trend might have reversed. If the short-term trend has changed, it will suggest the bias is to the downside given the technical analysis dictum that “the trend is your friend”. Indeed it is possible the trend may have already reversed and prices could be biased to going lower. If so, now would be the ideal time to enter a low risk short position.  

A break below 195.37 would supply added confirmation and likely see a sell-off down to a target at 194.11 and the 200-day Simple Moving Average (SMA) (not shown) followed by 192.64 and the 50-day SMA (also not shown). These heavy-duty SMAs, however, are likely to provide support to falling prices. 

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

• GBP/JPY attracts sellers for the second successive day amid the post-BoJ JPY strength.
• The BoJ rate-hike uncertainty and reduced bets for more BoE rate cuts to limit losses.
• Traders now look to the post-meeting conference for some meaningful opportunities.

The GBP/JPY cross drifts lower for the second straight day on Thursday and retreats further from over a three-month peak, around the 199.80 region touched the previous day. Spot prices slide below the 198.00 mark after the Bank of Japan (BoJ) announced its decision during the Asian session, albeit remain confined in a familiar range held since the beginning of this week. 

As was widely anticipated, the BoJ decided to leave monetary policy settings unchanged on the back of the political uncertainty after Sunday's snap elections in Japan. In the accompanying statement, the BoJ reiterated that it will continue to raise policy rates if the economy and prices move in line with the forecast. This, along with fears of possible government intervention and nervousness ahead of the November 5 US presidential election, drive haven flows towards the Japanese Yen (JPY) and exerts some pressure on the GBP/JPY cross. 

The British Pound (GBP), on the other hand, is weighed down by the emergence of some US Dollar (USD) dip-buying, which turns out to be another factor dragging spot prices lower. That said, doubts over the BoJ's ability to hike interest rates further, along with diminishing odds for more aggressive interest rate cuts by the Bank of England (BoE), could offer some support to the GBP/JPY cross. This, in turn, warrants some caution for bearish traders and before confirming that spot prices have topped out in the near term.

Investors now look forward to the post-meeting presser where comments by BoJ Governor Kazuo Ueda should influence the JPY and provide some impetus to the GBP/JPY cross in the absence of any relevant macro releases from the UK on Thursday.

• GBP/JPY is bullish, but it might have start a consolidation period after a furious rally in October.
• The RSI in overbought territory while the MACD is green and rising.
• The pair might sideways trade between 197.00 and 199.00.

The GBP/JPY currency pair mildly declined on Wednesday as investors seem to be taking a breather. However, the outlook remains bullish and he buyers must cold the 199.00 line

The Relative Strength Index (RSI) indicator has recently crossed into overbought territory, suggesting that the uptrend in the pair may be overextended and that a pullback or correction is likely. However, the Moving Average Convergence Divergence (MACD) is green and rising, suggesting that buying pressure is rising. The overall outlook is bullish, with the pair expected to continue trading higher in the near term but a period of side-ways trade shouldn’t be taken off the table.

Traders may consider taking profit or adjusting their positions accordingly to navigate this potential market shift. That potential consolidation might take place between the 197.00 and 199.00 boundaries.

GBP/JPY daily chart

• GBP/JPY pulls back from a multi-month peak, though the downside potential seems limited.
• The BoJ rate-hike uncertainty could undermine the JPY and lend some support to the cross. 
• Traders look to the UK Autumn Budget for short-term impetus ahead of the BoJ on Thursday.

The GBP/JPY cross edges lower during the Asian session on Wednesday and erodes a part of the previous day's gains to over a three-month peak, around the 199.70 region. Spot prices, however, lack follow-through selling and manage to hold above the 199.00 mark as trades look to the UK Autumn Budget for some meaningful impetus.

This will be the first budget announcement under the recently elected Labour government where Rachel Reeves, UK Chancellor of the Exchequer, is expected to raise taxes and increase public spending as suggested by Prime Minister Keir Starmer. Traders will keenly focus on the overall spending plans as it will influence the Bank of England’s (BoE) interest rate path, which, in turn, should influence the British Pound (GBP) and provide some meaningful impetus to the GBP/JPY cross. 

In the meantime, the possibility of more BoE rate cuts in November and December, bolstered by a fall in the UK Consumer Price Index to the lowest level since April 2021 and below the central bank's 2% target, is seen acting as a headwind for the GBP. The Japanese Yen (JPY), on the other hand, draws some support from fears that authorities will intervene in the market to prop up the domestic currency. This turns out to be another factor exerting some pressure on the GBP/JPY cross. 

Meanwhile, the loss of a parliamentary majority by Japan's ruling coalition raised doubts over the Bank of Japan's (BoJ) ability to tighten its monetary policy further. This, along with the prevalent risk-on environment, might keep a lid on any meaningful appreciating move for the JPY and help limit the downside for the GBP/JPY cross. Hence, any subsequent slide might still be seen as a buying opportunity, warranting some caution before confirming that spot prices have topped out.

• GBP/JPY strives to visit 200.00 ahead of key events in the United Kingdom and Japan.
• The BoJ is expected to keep interest rates steady at 0.25%.
• Investors await the UK budget to project Pound Sterling’s next move.

The GBP/JPY pair aims to extend its upside towards the psychological resistance of 200.00 in Tuesday’s European session. The cross has shown a strong rally for over six weeks as the Japanese Yen (BoJ) remains weak due to diminishing expectations that the Bank of Japan (BoJ) will hike interest rates again this year.

The BoJ has already raised its key borrowing rates by 35 basis points (bps) to 0.25% this year as inflationary pressures remain above 2% for a longer period. The central bank appears to be incapable of hiking them further amid growing doubts over sustainable economic growth. Market participants worry that the absence of a majority government in national elections could impact the growth prospects of the economy.

This week, investors will focus on the BoJ policy meeting, which is scheduled for Thursday. The BoJ is expected to leave interest rates unchanged at 0.25%. Investors will pay close attention to fresh guidance on interest rates.

Due to weakness in the Yen across the forex domain, Japan's Finance Minister Katsunobu Kato vowed to be vigilant to FX moves. "We will continue to closely monitor foreign exchange moves, including those driven by speculators, with a higher sense of vigilance," Kato said, Reuters reported.

Meanwhile, the Pound Sterling (GBP) will be influenced by the United Kingdom (UK) Autumn Forecast Statement announcement on Wednesday. The Labour Party is expected to raise taxes with a focus on increasing public spending. The UK Chancellor of the Exchequer is expected to provide strong funding for housing affordability and the National Health Service (NHS).

• GBP/JPY opens a Runaway Gap on the chart as it vaults higher. 
• The gap could be a sign the pair is in a strong uptrend which will probably extend.  

GBP/JPY opens a price gap after the open on Monday as it rallies higher following a breakout move from a Right-Angle Triangle pattern last week.

GBP/JPY 4-hour Chart 

The gap on GBP/JPY is probably what is classed as a “Runaway Gap”. These happen during strong rallies. 

The lack of volume accompanying this gap (yellow rectangle on volume) indicates this is probably not an Exhaustion Gap at the end of the trend. Price is, therefore, likely to continue rising.

Given GBP/JPY is in an established short and medium term uptrend it will probably extend in line with the dictum that “the trend is your friend”.

GBP/JPY has met resistance at the level of the key July 20 lower high at 199.40 and pulled back temporarily. This is just below the first upside target at 199.59 (blue shaded rectangle), the 61.8% Fibonacci extrapolation of the height of the Right Angle Triangle (at its widest point) higher. Price will probably eventually reach 199.59. 

A break above 199.40 would add confirmation of more upside to the target at both 199.59 and 201.97, the 100% extrapolation of the height of the Triangle. 

The Relative Strength Index (RSI) momentum indicator has exited the overbought zone (above 70) suggesting the pair will probably pullback for a while before renewing its uptrend. 

There is a good chance the price will fall and fully close the Runaway Gap before heading higher again. The bottom of the gap could provide a low risk entry point for traders wishing to enter the uptrend at an optimum point. 

• GBP/JPY strengthens to near 198.75 in Monday’s early European session, adding 0.70% on the day. 
• Political uncertainty in Japan exerts some selling pressure on the JPY. 
• The hawkish comments from the BoE policymaker underpin the Pound Sterling. 

The GBP/JPY cross gains momentum to around 198.75 during the early European session on Monday. The Japanese Yen (JPY) edges lower amid political uncertainty after Japan’s ruling Liberal Democratic Party (LDP) lost its majority at Sunday's national election. 

Japan’s ruling coalition has lost its parliamentary majority at Sunday's national election, raising uncertainty about the next government’s makeup and the Bank of Japan's (BoJ) rate hike plan, weighing on the Japanese Yen (JPY). The BoJ interest rate decision on Thursday will be closely watched. Although Governor Ueda preemptively ruled out a rate hike for this meeting, markets expect a possible rate hike in December or January. 

Nearly 86% of economists polled by Reuters anticipate the Japanese central bank to leave its rates unchanged at its October meeting on Thursday. Izumi Devalier, chief Japan economist at Bank of America, noted that while political uncertainty and instability could delay rate hikes, the BoJ cannot ignore sustained weakness in the JPY.

On the other hand, Bank of England (BoE) Monetary Policy Committee (MPC) member Catherine Mann, an outspoken hawk, said on Thursday, "It would be premature to cut rates if you have structural persistence in the relationship between wages and price formation.” The hawkish remarks from the BoE policymaker could provide some support to the Pound Sterling (GBP) in the near term. 

• GBP/JPY has broken out of the top of a Right-Angle Triangle and moved some of the distance towards its target. 
• The pair will probably go higher, subject to confirmation.  

GBP/JPY has broken out of a Right-Angle Triangle pattern and rallied higher. 

The pair completed a decisive move above the upper boundary of a Triangle pattern (see chart) and peaked on Wednesday at 198.44. 

The first upside target for the pattern lies at 199.59 (blue shaded rectangle), the 61.8% Fibonacci extrapolation of the height of the triangle (at its widest point) higher. 

GBP/JPY Daily Chart 

The pair has pulled back since peaking but the odds favor it eventually rallying back up to the aforementioned target. A break above Wednesday’s 198.44 high would provide bullish confirmation. 

The Relative Strength Index (RSI) momentum indicator is not yet in the overbought zone (above 70) suggesting the pair has room to go higher.

• GBP/JPY is rising as pre-election concerns the ruling LDP party could lose weakens the Yen. 
• A change of government or weaker ruling coalition could impact the BoJ’s decision making with consequences for the currency. 
• The Bank of England’s relatively more hawkish stance on interest rates is a further backwind for GBP/JPY. 

The GBP/JPY is trading over 1.0% higher on Wednesday in the 198.30s. A combination of political instability in Japan and shifting economic forecasts, coupled with differing monetary policy outlooks between the Bank of Japan (BoJ) and the Bank of England (BoE), are key elements shaping market sentiment and trading behavior.

The Japanese Yen (JPY) has been under considerable selling pressure due to domestic political uncertainty in Japan. Recent polls suggest that the ruling Liberal Democratic Party (LDP) may lose its majority in the upcoming general election. A potential leadership shift or the need for a coalition could complicate the government's policy-making, including monetary policy conducted by the Bank of Japan. Political instability often creates risk aversion, leading to a weakening of the affected currency, which, in this case, places downward pressure on the Yen. 

The International Monetary Fund's (IMF) downgrade of Japan's economic growth forecast to 0.3% for this year, down from a previous 0.7%, further exacerbates this pressure. A weaker economic outlook generally reduces demand for a currency, contributing to a decline in its value. In the near term the weak growth reflected in these revisions are contributing to downward momentum for the Yen, which can lead to an increase in the GBP/JPY exchange rate.

On the other hand, the Pound Sterling (GBP) is experiencing upward momentum against the Yen, supported by relatively more hawkish signals from the Bank of England (BoE). BoE Monetary Policy Committee (MPC) member Megan Greene’s remarks during the IMF meeting reinforced this sentiment. Despite recent data showing a drop in UK inflation to 1.7% in September, below the BoE's 2% target, Greene noted that the decrease was due to volatile components and would not sway her vote significantly. This suggests that the BoE may still prioritize tackling inflation, which supports expectations of tighter monetary policy. In contrast to Japan's more accommodative stance, this divergence can lead to an increase in the value of the Pound relative to the Yen.

Moreover, market participants are keenly awaiting BoE Governor Andrew Bailey’s upcoming speech, which could provide further insights into the bank’s future policy decisions, including potential rate cuts in November and December. While markets are speculating about the possibility of further rate reductions in the UK, the BoE’s relatively stronger position compared to the BoJ’s dovish policy stance is supporting the Pound, and the GBP/JPY.

Additionally, economic data releases such as the UK’s flash S&P Global/CIPS Purchasing Managers Index (PMI) for October are expected to show modest expansion in business activity. Positive data from the UK economy would further bolster the Pound, adding additional upward pressure to the GBP/JPY exchange rate.

In summary, the GBP/JPY exchange rate is being driven higher by a combination of the Yen's weakness, due to Japan's political and economic challenges, and the relative strength of the Pound, supported by the BoE’s more hawkish policy outlook. These factors collectively suggest an upward bias in the GBP/JPY pair in the near term.

• GBP/JPY drifts lower for the second straight day amid modest JPY strength. 
• Bets for faster BoE rate cuts undermine the GBP and weigh on the cross.
• The BoJ uncertainty might cap the JPY and help limit losses for spot prices.

The GBP/JPY cross kicks off the new week on a weaker tone and retreats further from its highest level since late July, around the 196.00 mark touched on Friday. Spot prices, however, remain confined in a familiar range held over the past two weeks or so and currently trade around the 194.70 region, down just over 0.20% for the day.

The Japanese Yen (JPY) continues with its relative outperformance for the second straight day amid renewed intervention fears, which, in turn, is seen as a key factor weighing on the GBP/JPY cross. In fact, Japan's top currency diplomat, Atsushi Mimura, warned against speculative trading and said on Friday that authorities are watching FX moves with a high sense of urgency. Adding to this, Japan's Deputy Chief Cabinet Secretary Kazuhiko Aoki noted that it is important for currencies to move in a stable manner reflecting economic fundamentals.

Meanwhile, a surprise fall in the UK Consumer Price Index (CPI) to the lowest level since April 2021 and below the Bank of England's (BoE) 2% target lifted bets for a 25 basis point (bps) interest rate cut at the November 7 meeting. Moreover, the money markets are pricing in the possibility of another BoE rate cut in December, which acts as a headwind for the British Pound (GBP) and exerts additional pressure on the GBP/JPY cross lower. That said, the uncertainty about the Bank of Japan's (BoJ) rate-hike plans should cap the JPY and offer support to the cross. 

BoJ Governor Kazuo Ueda said on Friday that the central bank must focus on the economic impact of unstable markets and risks from overseas. This comes on top of Japanese Prime Minister Shigeru Ishiba's surprise opposition to additional rate hikes and suggests the BoJ was in no rush to tighten its policy further ahead of the general election on October 27. Apart from this, the risk-on mood should cap the safe-haven JPY and limit losses for the GBP/JPY cross, warranting caution before placing aggressive bearish bets in the absence of any relevant macro data.

• GBP/JPY has formed a right-angle triangle which indicates a likely breakout higher. 
• The MACD momentum indicator is diverging bearishly with price, however, suggesting a mild downside risk.  

GBP/JPY has formed a right-angle triangle which indicates a breakout higher is likely. 

Price is more likely to break above the flat edge, according to technical analysis (TA) theory, which in this case runs along the topside of the pattern. 

GBP/JPY 4-hour Chart 

A decisive breakout above the top of the triangle would activate the pattern’s first upside target at 199.59, the 61.8% Fibonacci extrapolation of the height of the triangle (at its widest point) higher. This is the usual TA method for forecasting such moves. 

One bearish sign is that the Moving Average Divergence Convergence (MACD) momentum indicator has been diverging bearishly with price during the formation of the triangle. Whilst price has made a higher high, MACD has declined. This is a mildly bearish sign. 

A decisive breakout would be one accompanied by a long green candlestick that pierced cleanly through the top of the triangle at 196.00 and closed above near its high. This, or three green candlesticks in a row that broke cleanly above the flat top of the pattern. 

• GBP/JPY rises as UK Retail Sales unexpectedly grew by 0.3% MoM in September, defying market expectations of a 0.3% decline.
• The Pound Sterling may struggle as the BoE faces increasing pressure to accelerate rate cuts following lower inflation and jobs data.
• The Japanese Yen strengthened due to verbal intervention from Japanese authorities.

GBP/JPY continues to rise for the second consecutive day, trading around 195.90 during the Asian session. The Pound Sterling (GBP) gained momentum following a solid Retail Sales report from the United Kingdom (UK) released on Friday.

According to data from the Office for National Statistics (ONS), UK Retail Sales increased by 0.3% month-over-month in September, following a 1.0% rise in August. This was unexpected, as markets had anticipated a 0.3% decline for the month. On an annual basis, Retail Sales grew by 3.9%, compared to a 2.3% increase in August. Core Retail Sales, excluding automotive fuel, also rose by 0.3% month-over-month, down from the previous 1.1% growth, but better than the forecasted -0.3%.

Despite the positive Retail Sales report, the British Pound may encounter challenges as the Bank of England (BoE) faces mounting pressure to expedite rate cuts. This pressure stems from recent economic data showing declines in Consumer Price Index (CPI) and Producer Price Index (PPI) inflation figures, along with disappointing labor market statistics.

The Japanese Yen (JPY) gained ground, partly due to verbal intervention from Japanese authorities. Atsushi Mimura, Japan’s Vice Finance Minister for International Affairs and the top foreign exchange official stated on Friday that recent movements in the Yen have been "somewhat rapid and one-sided," emphasizing that excessive volatility in the foreign exchange market is undesirable.

Additionally, a spokesman for the Japanese government highlighted the importance of stable currency movements that reflect economic fundamentals, noting that authorities are closely monitoring foreign exchange fluctuations, particularly any speculative activity, with a heightened sense of urgency.

Japan's National Consumer Price Index (CPI) slowed to a year-on-year rate of 2.5% in September. Meanwhile, the Core CPI, which excludes volatile fresh food items, registered at 2.4%, a decrease from a 10-month high of 2.8%.