GBP/JPY remains on the back foot below 197.00 amid intervention fears

• GBP/JPY consolidates in a range on Tuesday amid mixed fundamental cues.
• The BoJ rate hike uncertainty undermines the JPY and supports spot prices.
• The BoE’s dovish stance keeps the GBP bulls on the defensive and caps gains.
• Intervention fears should further contribute to keeping a lid on the cross.

The GBP/JPY cross struggles for a firm intraday direction and oscillates in a narrow trading band, below the 197.00 round-figure mark through the first half of the European session on Tuesday. Moreover, the mixed fundamental backdrop warrants caution before positioning for the near-term trajectory amid mixed fundamental backdrop and thin trading volumes on Christmas Eve. 

The Japanese Yen (JPY) continues with its relative underperformance in the wake of the uncertainty over when the Bank of Japan (BoJ) will hike interest rates again. In fact, the Japanese central bank offered few clues on how soon it could push up borrowing costs at the end of the December policy meeting. Moreover, BoJ Governor Kazuo Ueda last week opened up the possibility of waiting longer for the next hike and said that the central bank will need a little bit more info on wage trends. This, along with a generally positive risk tone, continues to undermine the Japanese Yen (JPY) and acts as a tailwind for the GBP/JPY cross. 

Meanwhile, data released last Friday showed that Japan's core inflation accelerated in November and left the door open for a potential BoJ rate hike in January or March. Furthermore, speculations that Japanese authorities might intervene to prop up the domestic currency hold back traders from placing aggressive bearish bets around the JPY. Japan's Finance Minister Katsunobu Kato warned against excessive foreign exchange moves and reiterated earlier this Tuesday that the government is ready to act to stabilise the domestic currency. Apart from this, persistent geopolitical risks and trade war fears support the safe-haven JPY.

The British Pound (GBP), on the other hand, is undermined by the Bank of England's (BoE) split vote decision to leave interest rates unchanged last week and a dovish outlook It is worth mentioning that three members of the BoE's MPC voted to reduce rates. Moreover, policymakers downgraded their economic forecast for the fourth quarter of 2024. This might further contribute to capping the upside for the GBP/JPY cross. Hence, it will be prudent to wait for sustained strength and acceptance above the 197.00 mark before positioning for an extension of the monthly uptrend from the vicinity of the 188.00 round-figure mark.