GBP/JPY advances to 214.00 mark, highest since August 2008 amid notable JPY weakness
- GBP/JPY gains strong follow-through positive traction for the third consecutive day on Tuesday.
- BoJ uncertainty, Japan-China rift, and talks of a snap election in Japan weigh heavily on the JPY.
- The GBP benefits from a subdued USD demand and also contributes to the pair’s momentum.
The GBP/JPY cross builds on the previous day's breakout momentum through a nearly three-week-old range and gains follow-through positive traction for the third consecutive day on Tuesday. Spot prices have climbed to a fresh high since August 2008, with bulls now looking to extend the ascending trend further beyond the 214.00 mark amid a broadly weaker Japanese Yen (JPY).
Reports that Japan's Prime Minister Sanae Takaichi may soon call a snap election to take advantage of her approval ratings fuel speculations about further expansionary fiscal policy. This comes on top of the uncertainty over the likely timing of the next rate hike by the Bank of Japan (BoJ) and the deepening Japan–China diplomatic crisis, which, in turn, is seen weighing heavily on the JPY. Moreover, the underlying bullish sentiment across the global equity markets turns out to be another factor undermining the JPY's safe-haven status and pushing the GBP/JPY cross higher.
The JPY bears, meanwhile, seem unaffected by expectations that Japanese authorities could step in to stem further weakness in the domestic currency. In fact, Japan’s Finance Minister Satsuki Katayama said this Tuesday that she shared concerns over the JPY's recent one-sided slide with US Treasury Secretary Scott Bessent and added that the tolerance for weakness was limited. Moreover, the BoJ's hawkish outlook also does little to ease the prevalent selling bias surrounding the JPY, which backs the case for a further near-term appreciating move for the GBP/JPY cross.
The British Pound (GBP), on the other hand, benefits from the lack of any meaningful US Dollar (USD) buying interest. This, in turn, validates the near-term positive outlook on the back of the overnight strength beyond the previous multi-year peak, around the 212.15 region, touched last week. From a technical perspective, the daily Relative Strength Index (RSI) is flashing overbought conditions and warrants caution for the GBP/JPY bulls. Traders now look to Bank of England (BoE) Governor Andrew Bailey's speech for a fresh impetus amid bets for two more interest rate cuts in 2026.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
Recommended Articles
