GBP/JPY pulls back to levels near 197.00 as market sentiment sours

The Yen rallies across the board as fears about US tariffs return.
Trump will start sending letters to trade partners informing them about tariffs.
BoJ-BoE monetary policy divergence is adding pressure on the British Pound.

The Sterling is giving away on Friday some of the ground gained on Thursday, and trades back to levels around 197.20, as the safe-haven Yen outperforms its main peers, with risk appetite fading on renewed concerns about global trade.

In the absence of key fundamental data in the UK or Japan, investors’ focus is shifting to the upcoming tariffs deadline in July 9, with little progress on trade deals so far. US President Trump acknowledged on Thursday the complexity of reaching trade deals with 170 countries and affirmed that he will start sending letters to trade partners on Friday, informing them about the tariffs that will be applied to their products.

These comments have put investors on edge, wary of a likely disruption of internationa trade that would cripple global ecoopnomic growth.

Beyond that, BoE Governour Andrew Bailey struck a dovish note on the Sintra summit of central bankers, highlighting the weakening labour market and global economic uncertainty, which points to further monetary easing down the road.

The BoJ, on the contrary, remains committed to normalising its monetary policy, as board member Takata reiterated on Thursday. This monetary policy divergence is posing additional weight on the pair.