GBP/JPY rebounds by almost 150 pips during the day, targets the mid-210.00s as JPY softens

GBP/JPY Recovers from Early Losses as Yen Weakens

The GBP/JPY pair has quickly bounced back from its earlier dip near 209.00 during the Asian session, surging to a new daily peak and closing the weekly bearish gap. At present, the pair is trading close to 210.35-210.40, remaining largely flat on the day, with the Japanese Yen (JPY) under broad pressure providing support.

Recent data released last Friday revealed that core consumer inflation in Tokyo dropped below the Bank of Japan’s (BoJ) 2% target for the first time this year. Additionally, reports indicate that Prime Minister Sanae Takaichi voiced caution regarding further monetary tightening in discussions with the BoJ governor, dampening expectations for an imminent rate increase. These developments have weighed on the JPY, encouraging some investors to buy the GBP/JPY pair at the start of the week.

Meanwhile, the British Pound (GBP) has found some support as the US Dollar (USD) retreats from its highest levels since January, providing an extra boost to the pair. The Green Party’s historic win in the Gorton and Denton by-election also highlighted the shifting landscape of UK politics. However, expectations that the Bank of England (BoE) may soon ease policy could restrain bullish momentum for the Pound and limit further advances in GBP/JPY.

Last week, BoE Governor Andrew Bailey told the Parliament’s Treasury Committee that there is room for rate reductions, anticipating inflation will return to the 2% target. In contrast, Bank of Japan Governor Kazuo Ueda reaffirmed on Thursday that the central bank is prepared to continue raising interest rates if economic and price forecasts are met. Supporting this, BoJ’s Himino commented today that policy should gradually shift toward a neutral stance with moderate rate hikes.

These signals keep the possibility of further BoJ tightening alive. Alongside speculation that Japanese officials may intervene to prevent additional currency weakness, this could help limit further declines in the Yen. Additionally, heightened geopolitical tensions in the Middle East have triggered a global move toward safe-haven assets, which could bolster the JPY and restrict gains in GBP/JPY. As a result, traders may want to wait for a clear buying trend before seeking further upside in the pair.