GBP/JPY climbs back above mid-208.00s; looks to UK macro data for fresh impetus

• GBP/JPY regains positive traction on Friday amid the emergence of some selling around the JPY.
• Concerns about Japan’s public finance and a positive risk tone undermine the safe-haven JPY.
• The divergent BoJ-BoE outlooks warrant caution for bulls ahead of important UK macro releases.

The GBP/JPY cross attracts fresh buyers following the previous day's modest decline and climbs back above mid-208.00s during the Asian session on Friday. Spot prices remain close to the highest level since August 2008, touched earlier this week, as traders now look forward to the UK data dump for a fresh impetus.

The UK Office for National Statistics (ONS) will publish the monthly GDP report and Industrial Production figures later today. The data will influence the British Pound (GBP) and produce short-term trading opportunities around the GBP/JPY cross. In the meantime, a combination of factors undermines the Japanese Yen (JPY) and might continue to act as a tailwind for spot prices.

Investors remain worried about Japan's deteriorating fiscal condition on the back of Prime Minister Sanae Takaichi's massive spending plan. Apart from this, the prevalent risk-on environment – as depicted by a generally positive tone around the equity markets – is seen weighing on safe-haven assets, including the JPY, which, in turn, offer some support to the GBP/JPY cross.

The downside for the JPY, however, remains cushioned in the wake of firming expectations for an imminent interest rate hike by the Bank of Japan (BoJ) as early as next week. This marks a significant divergence in comparison to bets that the Bank of England (BoE) will lower borrowing costs at its policy meeting next Thursday, which should cap any further gains for the GBP/JPY cross.

Heading into the key central bank event risks, trades next week will also confront the release of important UK macro data – including monthly employment details, the latest consumer inflation figures, and flash PMIs. This, in turn, warrants some caution before placing fresh bullish bets around the GBP/JPY cross and positioning for an extension of over a one-month-old uptrend.