CFD Trading Rate Great Britain Pound vs Japanese Yen (GBPJPY)

• GBP/JPY edges lower on the release of Japanese CPI data on Tuesday.
• Pound Sterling received upward support on speculation regarding a delay in BoE’s rate cuts
• Japan’s CPI (YoY) grew by 2.2% against the previous growth of 2.6%.

GBP/JPY halts its winning streak that began on February 20, edging lower to near 190.80 during the Asian session on Tuesday. However, speculation arose regarding a potential delay in rate cuts following a testimony to the UK Treasury Committee by Bank of England (BoE) Governor Andrew Bailey and other policymakers last week. Bailey mentioned that while he wouldn't forecast the exact number of cuts, the bank was moving towards a path of lowering rates. This speculation has lifted the Pound Sterling (GBP) against the Japanese Yen (JPY).

Governor Bailey also emphasized that the Bank of England has transitioned from a focus on determining the tightness of policy and the necessary height of rates to considering how long the central bank needs to maintain this stance to achieve sustained inflation. Following the BoE's decision earlier this month to keep the interest rate steady at 5.25%, the markets have factored in expectations for four rate cuts by the end of the year.

However, the Japanese Yen (JPY) managed to draw in some buyers. Japanese consumer inflation data renewed expectations for a potential adjustment in the Bank of Japan's (BoJ) policy stance, leading investors to exercise caution. Additionally, recent verbal intervention by Japanese authorities may offer some support for the JPY.

In January, Japan’s National Consumer Price Index (CPI) grew by 2.2% year-over-year, slightly lower than the previous growth of 2.6%. Additionally, Core CPI (YoY) increased by 3.5%, down from the previous 3.7%. Traders are now eagerly awaiting Retail Trade data to gain further insights into the Japanese economic landscape.

• GBP/JPY bull run takes the pair into its highest bids since 2015.
• Technical ceiling parked near 196.00 at June 2015 high.
• Japan National CPI due early Tuesday, expected to ease further.

GBP/JPY is up over 6% YTD in 2024 as the pair continues to climb into multi-year highs, and has reached its highest bids since August of 2015 just above the 191.00 handle.

This week sees a smattering of UK economic data on the calendar, but is strictly low-tier. Japan’s National Consumer Price Index (CPI) inflation figures are due early Tuesday, with Japanese Retail Trade numbers slated for Thursday.

Japan’s National CPI for the year ended in January is broadly expected to reiterate the findings from the Tokyo CPI advance print as Japanese inflation continues to cool. Core National CPI is forecast to recede to 1.8% YoY from the previous period’s 2.3%.

Early Thursday’s Japan Retail Trade is expected to rebound to 2.3% YoY compared to the previous 2.1%, but January’s Industrial Production is expected to decline sharply by 7.4% compared to the previous month’s 1.4% increase.

GBP/JPY is on fast approach to 2015’s peak bids near 196.00, with prices above the 200.00 major price level waiting beyond. GBP/JPY has not traded above 200.00 since 2008.

GBP/JPY technical outlook

GBP/JPY is up over 3% from February’s bottom bids at 185.23, and the pair is drifting into multi-year peaks that leave the Guppy with few technical barriers as the march up the charts continues.

A near-term supply zone is marked out between 190.50 and the 190.00 handle, and 190.00 remains a key technical barrier after previously capping intraday chart action following February’s earlier rejection from the key level.

GBP/JPY has surged in 2024, climbing from January’s early bottom at 178.74, catching a bullish rebound from the 200-day Simple Moving Average (SMA) in the process, which is currently rising through the 183.00 handle.

GBP/JPY hourly chart

GBP/JPY daily chart

• GBP/JPY eyes stabilization above 191.00 as hopes for BoJ’s pivot to exit a dovish stance wane.
• Japan’s National CPI data will influence market expectations for BoJ’s interest rates.
• UK’s high wage growth is offsetting downside pressures on inflation BoE’s higher interest rates.

The GBP/JPY pair oscillates near a historic high of 191.00 in the London session on Monday. The pair aims to extend more upside as uncertainty over the Bank of Japan’s (BoJ) plans of exiting the decade-long dovish monetary policy stance is waning.

The Japanese economy remains in a technical recession in the second half of 2023, which is an unfavorable condition for the BoJ to consider a shift to a restrictive stance. The economy needs heavy monetary stimulus to achieve an uptick in the coming quarters.

Meanwhile, investors await the National Consumer Price Index (CPI) data for January, which will be published on Tuesday. Investors anticipate that annual CPI excluding fresh foods would fall below 1.8% from 2.3% in December. This would indicate that the BoJ is struggling to maintain the underlying inflation above the 2% target. Eventually, this will undermine the plans of exiting the expansionary policy stance.

On the United Kingdom front, higher wage growth and service inflation continue to be painful for the economy. The wage growth in the UK economy is increasing at a pace double what is required to be consistent with bringing down inflation to the 2% target. This is forcing the Bank of England (BoE) to delay rate cuts aggressively as it could flare up price pressures again

Meanwhile, investors await fresh guidance from BoE policymakers on the timing of rate cuts.

On the economic data front, UK’s recruitment data company Adzuna showed that job postings by British employers hit significantly in January. "January 2024 has proven to be one of the most difficult starts to the year for job hunters in recent years with companies continuing to put hiring plans on ice," Adzuna co-founder Andrew Hunter said.

• GBP/JPY could extend gains due to diminished expectations regarding the BoJ exiting from negative interest rates.
• The safe-haven Japanese Yen could face challenges due to the surge in the global money markets.
• UK PMI data showed a slight improvement in domestic business activity in the private sector.

GBP/JPY remains around 190.60 during the Asian session on Friday, exhibiting a positive bias to extend its winning streak for the fourth consecutive day. Concerns about a potential recession in Japan may delay the Bank of Japan's (BoJ) plan to exit from negative interest rates in the near term.

Moreover, the surge in global money markets, as investors digest the dashed hopes for interest rate cuts by major central banks worldwide, is weighing on the safe-haven Japanese Yen (JPY). However, the JPY may find some support from recent verbal intervention by Japanese authorities.

Earlier in the week, the Japanese Yen gained support from better-than-expected Trade Balance figures released by the Ministry of Finance of Japan, thereby limiting losses for the GBP/JPY cross. Additionally, market participants are awaiting Japan’s National Consumer Price Index (CPI) data scheduled for release on Tuesday.

The Pound Sterling (GBP) received upward support from mixed Purchasing Managers Index (PMI) data for February from the United Kingdom (UK). While the preliminary Manufacturing PMI for February came in at 47.1, slightly below market expectations of 47.5, the Services PMI remained unchanged at 54.3, surpassing the consensus of 54.1. The Composite PMI arrived at 53.3, exceeding expectations of remaining consistent at 52.9.

Uncertainty prevails among investors regarding the trajectory of policy rates by the Bank of England (BoE), particularly following remarks from BoE officials. BoE Governor Andrew Bailey, in an address to the United Kingdom Parliament on Tuesday, noted the rapid decrease in UK inflation. He emphasized that the central bank does not require a definitive return of inflation to target levels before considering interest rate cuts.

Furthermore, on Wednesday, Swati Dhingra, a member of the Bank of England, suggested that delaying interest rate cuts could lead to increased living costs and potentially result in a harsh economic downturn for the United Kingdom.

• GBP/JPY tested into the high end as the Yen recedes.
• UK Public Sector Net Borrowing declined sharply in January.
• UK PMIs due in Thursday, markets expected a mixed steady print.

GBP/JPY rotated on Wednesday, marking in a slight new high for the week as the Pound Sterling (GBP) gets a leg up from a broad-market pullback in the Japanese Yen (JPY). Bank of England (BoE) policymaker Swati Dhingra noted on Wednesday that the outlook for UK inflation remains bumpy, but downwards, noting that UK consumption still remains below pre-pandemic levels as the UK lags behind its developed economy cohorts in Europe and the US.

UK Public Sector Net Borrowing, which tracks the UK government’s budget surplus or deficit, tumbled to its lowest print in at least fifteen years, showing a net decline of £-17.615 billion, far below the forecast £18.4 billion. The figure fell back from the previous MoM print of £6.451 billion, though the National Statistics office tracking of the UK’s federal budget is prone to revisions as time goes on.

Thursday brings the UK’s latest Purchasing Manager’s Index (PMI) figures for February, and markets are expecting the UK S&P Global/CIPS Services PMI to tick down to 54.1 from 54.3 MoM. The Manufacturing PMI component is forecast to see a slight improvement to 47.5 from 47.0, and the Composite UK PMI is expected to hold steady at 52.9.

February’s GfK Consumer Confidence slated for Friday is expected to see a slight improvement to -18.0 from -19.0 to round out the trading week, and Japan will be out for Thursday as the country celebrates Japanese Emperor Naruhito’s birthday.

GBP/JPY technical outlook

The Guppy continues to drift into the high end with the pair sticking close to its highest bids since 2015. The GBP/JPY continues to be bolstered by the 200-hour Simple Moving Average (SMA) near 189.00 in the near-term, and momentum is holding firmly in the bullish side despite slowing gains on the chart.

The GBP/JPY continues to test into the 190.00 major handle, and the pair sees firm technical support after rebounding from the 200-day SMA below 182.00 in early 2024. The pair remains up around 6% from December’s choppy swing low into 178.00.

GBP/JPY hourly chart

GBP/JPY daily chart

• The GBP/JPY stands at 189.24 reflecting a moderate gain of 0.11% in Tuesday's trading session.
• The Bank of England maintains its neutral stance, with Governor Bailey hinting at potential rate cuts even before inflation reaches the bank’s target.
• Japanese and British preliminary PMIs from February are due on Thursday.

In Tuesday's session, the GBP/JPY pair recorded modest gains, trading at 189.24. Influences on the pair's movement encompass the ongoing shifts in both UK and Japanese financial and economic landscapes which are shaping the Bank of England (BoE) and the Bank of Japan (BoJ) monetary policy decisions. The British bank remains cautious warning about the resilient local economy while the BoJ doesn’t give clear signals on when it will leave its ultra-loose policy.

On the British front, Bank of England (BoE) officials, including Governor Andrew Bailey, gave no fresh policy guidance during their testimony before the UK Treasury Select Committee. Bailey perceived an upturn in the economy and advised that the central bank could consider rate cuts even before inflation hits their target levels. However, as for now, markets are pricing in that the first rate cut will be in the August meeting but incoming data will continue shaping the timing of the easing cycle.

GBP/JPY daily chart

The daily Relative Strength Index (RSI) for GBPJPY is currently situated in positive territory, marking a slight uptrend, with a mild surge further cementing bullish control. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram, complementing the bullish cues from the RSI, has continued to print green bars, reflecting consistently positive momentum in recent days, although the flattening slopes point towards potential slowing of the current bullish momentum.

Finally, it's worth noting that GBPJPY remains above its 20, 100, and 200-day Simple Moving Averages (SMAs), hinting at the bullish command in the overall trend, despite indicators showing some signs of flattening. This technical position largely backs the continued dominance of buyers, with any near-term pullbacks likely serving as technical corrections for further climbs in the medium-to-long term.

GBP/JPY daily chart

• GBP/JPY steady at 189.14, amid quiet trading due to US President’s Day holiday and sparse data.
• Market eyes BoE Governor Bailey's upcoming speech and key Japanese economic reports.
• Technical analysis indicates GBP/JPY could be on the verge of a breakout, with 189.00-191.00 as crucial range for direction.

The Pound Sterling failed to gain traction against the Japanese Yen in the mid-North American session and is flat at around 189.14, as Wall Street remains closed amid the US President’s Day holiday.

An absent economic docket in the UK and Japan has kept the GBP/JPY within familiar levels. On Tuesday, the calendar will gather momentum with the Bank of England’s (BoE) Governor Andrew Baily's speech. On the Japanese front, the schedule would remain light until Wednesday’s, with the release of the Reuters Tankan Index, and the Balance of Trade for January.

From a technical standpoint, the GBP/JPY is upward biased, though it has remained range-bound within the 189.00-190.00 figure. A breach of that level could open the door to challenging the 191.00 mark.

On the other hand, if sellers move in and drag prices below 189.00, the GBP/JPY could tumble sharply. The first support would be the Tenkan-Sen at 188.12, followed by the February 15 low of 187.92. Once those levels are cleared, the pair could aim towards the Kijun-Sen at 187.34, ahead of the 187.00 mark.

GBP/JPY Price Action – Daily Chart

• GBP/JPY gains ground ahead of a slew of data releases from the United Kingdom.
• UK Retail Sales (MoM) could improve to 1.5% from the previous 3.2% decrease.
• BoJ Governor Kazuo Ueda expects the monetary conditions in Japan to have remained accommodative.

GBP/JPY receives upward support ahead of the release of Retail Sales data from the United Kingdom (UK) due on Friday. The monthly report for January is expected to show an improvement of 1.5%, swinging from the previous decrease of 3.2%. While year-over-year report could print a reading of -1.4% as compared to the previous -2.4 reading. The GBP/JPY cross inches higher to near 189.10 during the Asian trading hours.

GBP/JPY cross faced challenges as the Japanese Yen (JPY) cheered the remarks from Japan's top officials, hinting at a potential intervention in the Forex market. Additionally, the escalated geopolitical tensions in the Middle East could have increased demand for the safe-haven JPY and dragged the GBP/JPY cross downward.

Bank of Japan (BoJ) Governor Kazuo Ueda stated on Friday that the specific methods for rolling back stimulus would hinge on the prevailing economic conditions. Considering the current economic and price outlook, monetary conditions in Japan are expected to remain accommodative even after the cessation of negative rates.

The quarterly growth of Gross Domestic Product (GDP) extended its decline to 0.3% in the fourth quarter of 2023 compared to the previous contraction of 0.1%. The GDP (YoY) growth surprisingly declined by 0.2% against the expected increase of 0.1%, swinging from the growth rate of 0.2%.

The United Kingdom's economy has officially entered a technical recession, marked by two consecutive quarters of negative GDP growth. Furthermore, Bank of England policymaker Catharine L. Mann mentioned that the central bank requires at least one more set of inflation data before determining its next steps.

• GBP/JPY extends this week’s corrective decline from the 190.00 mark or a multi-year top.
• A technical recession in the UK revives bets for an early BoE rate cut and weighs on the GBP.
• Verbal intervention from Japanese authorities benefits the JPY and contributes to the downfall.

The GBP/JPY cross remains under heavy selling pressure for the second successive day on Thursday and retreats further from its highest level since August 2015, around the 190.00 psychological mark touched earlier this week. The downward trajectory picks up pace in reaction to the disappointing UK GDP print and drags spot prices to the 188.30 area, or a multi-day low during the first half of the European session.

The UK Office for National Statistics reported that the economy unexpectedly contracted by 0.3% in the final three months of 2023. This follows a 0.1% drop in GDP during the July-September period, meaning that the economy entered a technical recession. Against the backdrop of Wednesday's softer UK consumer inflation figures, the latest data reaffirms market bets that the Bank of England (BoE) will start cutting interest rates soon and continues to undermine the British Pound (GBP).

The Japanese Yen (JPY), on the other hand, draws support from speculations about a potential intervention by authorities to stem the recent decline in the domestic currency. Apart from this, geopolitical tensions stemming from conflicts in the Middle East further benefit the safe-haven JPY and contribute to the offered tone surrounding the GBP/JPY cross. That said, reduced bets for an imminent shift in the Bank of Japan's (BoJ) policy stance might keep a lid on any meaningful downfall.

Provisional data released this Thursday showed that Japan's GDP contracted by 0.4% during the October-December period, missing market expectations for a 1.4% growth by a huge margin. This comes on top of the previous quarter's slump of 3.3%, confirming a technical recession and raising uncertainty about the likely timing of when the BoJ will exit the negative interest rates policy. This, in turn, warrants some caution before confirming that the GBP/JPY cross has formed a near-term top.

Technical levels to watch

• UK inflation figures broadly missed forecasts on Wednesday.
• GBP/JPY slid further away from 190.00 level, rejection pattern forms.
• Thursday sees UK GDP numbers, Friday to wrap up with UK Retail Sales.

GBP/JPY got knocked further back from the 190.00 handle on Wednesday after UK inflation numbers came in broadly below expectations, dragging the pair into a rough near-term consolidation pattern as investors gear up for further UK data releases in the back half of the trading week.

UK Consumer Price Index (CPI) inflation in January slid more than markets forecast, with MoM headline CPI printing at -0.6% versus the forecast -0.3%, falling back from the previous month’s 0.6%. Annualized CPI held steady at 4.0% for the year ended in January, coming in below the market’s forecast uptick to 4.2%.

Japan’s Gross Domestic Product (GDP) print early Thursday is expected to bring little new for markets to chew on, with Japan quarterly GDP expected to hold steady at -0.1% for the fourth quarter. Later Thursday sees the UK’s own GDP growth print, forecast to decline to a scant 0.1% for the annualized fourth quarter compared to the previous period’s 0.3% as the UK domestic economy continues to go lopsided and growth edges closer towards recession territory.

Friday will wrap up the UK economic data docket with January’s Retail Sales, which are forecast to rebound to 1.5% MoM after December’s -3.2%.

GBP/JPY technical outlook

The GBP/JPY got pulled further down from the 190.00 handle on Wednesday, gearing the intraday charts for a technical rejection from the key price level and setting the pair up for a continued decline back to the near-term median at the 200-hour Simple Moving Average (SMA) around 187.90.

Despite a near-term pulldown, the GBP/JPY is firmly planted deep in bull country, with recent highs above 190.00 testing into multi-year highs and the pair remains well above long-term medians at the 200-day SMA near 182.40. The pair has closed in the green for five consecutive trading days, and Wednesday’s red close still leaves the pair above former significant technical resistance near the 188.00 handle.

GBP/JPY hourly chart

GBP/JPY daily chart

• GBP/JPY pulls back from a multi-year peak touched on Tuesday amid a pickup in the JPY demand.
• Verbal intervention from the Japanese authorities, along with the risk-off mood, underpin the JPY.
• Diminishing odds for an early BoE rate cut could help limit losses for the cross ahead of the UK CPI.

The GBP/JPY cross meets with some supply during the Asian session on Wednesday and erodes a part of the previous day's strong gains to the 190.00 psychological mark, or its highest level since August 2015. Spot prices currently trade just above the mid-189.00s, down over 0.10% for the day, though any meaningful corrective decline still seems elusive.

The Japanese Yen (JPY) attracts some haven flows in the wake of the risk-off impulse and draws additional support from verbal intervention by Japanese authorities. In fact, Japan’s top currency diplomat Masato Kanda said that the government is closely watching FX moves with a high sense of urgency and is ready to take appropriate action, including intervention, if needed. Adding to this, Japan's Finance Minister Shunichi Suzuki said that rapid FX moves are undesirable and that the government is watching the market with even stronger urgency, though made no comments on intervention. Nevertheless, the comments provide a modest lift to the JPY and turn out to be a key factor exerting some downward pressure on the GBP/JPY cross.

The downside, however, remains cushioned in the wake of reduced bets for early interest rate cuts by the Bank of England (BoE), which might continue to act as a tailwind for the British Pound (GBP). The official data released on Tuesday showed that UK Unemployment Rate was lower than expected in the last three months of 2023 and resilient wages, which have been a driver of sticky consumer price inflation. This gives the BoE more reason to be cautious over the timing of the first interest cut. The market focus now shifts to the latest UK consumer inflation figures, due later today, which might influence the GBP and provide some impetus to the GBP/JPY cross ahead of BoE Governor Andrew Bailey's testimony later this Wednesday.

This week's UK economic docket also features the release of the Preliminary Q4 GDP print and monthly Retail Sales figures on Thursday and Friday, respectively. The crucial data should influence market expectations about the BoE's future policy decision and infuse some volatility around the GBP/JPY cross. Bulls, meanwhile, could turn cautious amid speculations about a possible JPY intervention and bets for an imminent shift in the Bank of Japan's (BoJ) policy stance.

Technical levels to watch

• GBP/JPY briefly touched 190.00 as the GBP lifts against the Yen.
• UK Unemployment Rate declined more than expected.
• UK CPI inflation slated for Wednesday.

GBP/JPY briefly tested the 190.00 major price handle on Tuesday as the Pound Sterling (GBP) rose across the broader FX market, bolstered by a better-than-expected Unemployment Rate print and easing wage growth figures helping to quell inflation fears.

UK Average Earnings (including bonuses) fell to 5.8% for the annualized quarter ended in December versus the forecast 5.6%, down from the previous period’s 6.7% (revised from 6.5%). Wage growth declined less than expected, but easing earnings growth is helping to squelch ongoing inflation fears in the UK.

The UK ILO Unemployment Rate for the quarter ended in December ticked down to 3.8% versus the forecast 4.0%, down even further from the previous quarter’s 4.2%. Money markets have reduced their bets of a June 25 basis point cut from the Bank of England down to 60% on Tuesday, down from the 75% prior to the economic figure prints.

Wednesday sees a slew of UK inflation figures, including headline Consumer Price Index (CPI) inflation that is expected to slide to -0.3% for January compared to the previous month’s 0.4%. The headline CPI print for the year ended in January is forecast to tick upwards to 4.2% from 4.0%.

Early Thursday also sees Japan’s latest Gross Domestic Product (GDP) update, which is expected to rebound to 0.3% for the fourth quarter compared to the previous quarter’s -0.7%.

Japan’s GDP print will be followed up by the UK’s own GDP release later on Thursday. UK GDP growth is expected to hold steady at a contractionary -0.1%.

GBP/JPY technical outlook

GBP/JPY surged 0.6% on Tuesday, testing the 190.00 major handle and extending the pair into a fifth straight day of gains after finding a tentative floor near 185.23. The pair has risen nearly 6% since seeing a bullish rejection from the 200-day Simple Moving Average (SMA) near 179.00.

The GBP/JPY is struggling to push decidedly over the 190.00 handle, and a fresh data-driven bullish push could be necessary to avoid a bearish turnaround back into the 188.00 handle.

GBP/JPY hourly chart

GBP/JPY daily chart

• GBP/JPY plunged and rallied on Monday to keep bids pinned into familiar levels.
• Plenty of UK and Japan data on offering this week.
• The pair remains trapped in rough consolidation levels for the time being.

The GBP/JPY saw an early dip below the 188.00 handle before markets recovered back into familiar levels on Monday, and the Guppy pair continues to trade into familiar consolidation levels heading into a heavy week full of UK and Japanese figures on the economic calendar’s data docket.

This week brings UK labor figures on Tuesday, followed by Wednesday’s UK Consumer Price Index (CPI) inflation. Thursday follows up with Japanese Gross Domestic Product (GDP) figures early in the day, after which the UK brings its own GDP growth print. Friday will round out the week with UK Retail Sales.

UK labor figures, Japan GDP data in the pipe

Tuesday’s UK ILO Unemployment Rate for the quarter ended in December is expected to tick down to 4.0% from the previous quarter’s 4.2%, while Average Earnings Including Bonuses for the annualized quarter through December is expected to soften further, to 5.6% from the previous period’s 6.5%.

The UK’s YoY Core CPI inflation is expected to tick higher on Wednesday, forecast to increase to 5.2% from 5.1%, while headline CPI inflation for January is forecast to recede, expected to print at -0.3% versus the previous month’s 0.4%.

Japanese GDP growth is expected to rebound early Thursday, with fourth quarter GDP forecast to print at 0.3% after the third quarter’s -0.7%.

GBP/JPY technical outlook

GBP/JPY remains well-supported with the pair continuing to trade on the high side of the 200-hour Simple Moving Average (SMA) near 187.20. The pair broke through the near-term median technical barrier last week and has climbed nearly 2% from February’s early lows near 185.25.

The volatile Guppy pair remains bid into multi-year highs, testing the waters just below the 190.00 major price handle, with near-term technical support from the 200-day SMA at 182.20.

GBP/JPY hourly chart

GBP/JPY daily chart

• GBP/JPY fails to capitalize on its modest intraday gains to levels just above mid-188.00s.
• Expectations for an imminent BoJ policy pivot underpin the JPY and exert some pressure.
• Bets that the BoE will soon begin cutting interest rates further weigh on the British Pound.

The GBP/JPY cross attracts some intraday sellers following an uptick to the 188.65 area and drops to a fresh daily low during the first half of the European session on Monday. Spot prices currently trade around the 188.25-188.20 region and look to extend Friday's late pullback from the vicinity of the 189.00 round figure, or the YTD peak.

Investors seem convinced that the Bank of Japan (BoJ) will eventually pivot away from its ultra-loose monetary policy settings after the outcome of annual wage negotiations in March. This, to a larger extent, helps offset BoJ Deputy Governor Shinichi Uchida's dovish remarks on Thursday, saying that aggressive tightening is unlikely even after an exit from the negative interest rate policy and underpins the Japanese Yen (JPY). The British Pound (GBP), on the other hand, meets with some supply in the wake of reviving US Dollar (USD) demand, which, in turn, is seen as another factor exerting downward pressure on the GBP/JPY cross.

The GBP is further weighed down by growing acceptance that the Bank of England (BoE) could lower borrowing costs in the next few months. In fact, the current market pricing suggests that the UK central bank could deliver four 25 basis points (bps) interest rate cuts by the end of the year. This, in turn, suggests that the path of least resistance for the GBP/JPY cross is to the downside and supports prospects for deeper losses. Bearish traders, however, might wait for this week's key UK macro releases – starting with the jobs report on Tuesday, followed by consumer inflation figures and the prelim Q4 GDP print, on Wednesday and Thursday, respectively.

Investors will further take cues from BoE Governor Andrew Bailey's scheduled speech on Wednesday for some meaningful impetus. Hence, it will be prudent to wait for strong follow-through selling before confirming that the GBP/JPY cross has topped out in the near term and positioning for further losses.

Technical levels to watch

• GBP/JPY finds itself at the top end of near-term technical resistance.
• Next week sees a hefty economic calendar showing for the UK.
• Japan GDP growth slated for next Thursday.

GBP/JPY found itself back into familiar technical levels near 188.50 on Friday after an early-week bounce from the 186.20 region as the Pound Sterling (GBP) finds itself stepping over the Japanese Yen (JPY) that spent most of the week on the soft side.

It was a thin economic calendar for both currencies this week, leaving the Guppy pair hamstrung as investors grapple with interest rate cut outlooks from both the Bank of England (BoE) and the Bank of Japan (BoJ). Both central banks appear to be quite dovish for opposite reasons, with the BoE grappling with a lopsided UK economy that sees inflation threats around every corner, and the BoJ that fears a deflationary overhang in the future, with Japanese inflation forecast to decline below the Japanese central bank’s 2% target in the months to come.

BoE’s Bailey, Japan GDP in the pipe for next week

BoE policymaker Haskel noted early Friday that while signs of progress on inflation in the UK have been encouraging, but there’s still plenty of room to clear on the BoE’s to-do book, and money markets have once again trimmed bets on rate cuts from the UK’s central bank. Rate markets now see less than 75 basis points in rate trims from the BoE in 2024.

Next week kicks off with an appearance from BoE Governor Andrew Bailey who will be giving a speech at England’s Loughborough University. The midweek also sees UK labor figures, as well as Consumer Price Index (CPI) inflation and UK GDP growth, with next Friday wrapping up the UK’s data week with Retail Sales.

Japan sees GDP growth figures early Thursday, and markets are forecasting a fourth-quarter growth rebound in Japan to 0.3% QoQ, compared to the previous quarter’s -0.7% decline.

GBP/JPY Technical outlook

GBP/JPY continues to clatter along a near-term technical ceiling just south of the 189.00 handle, finding room near 188.80 before pulling back into the 188.50 region ahead of Friday’s closing bell. The pair rose cleanly through the 200-hour Simple Moving Average (SMA) near the 187.00 handle early in the week, and intraday momentum remains in the hands of bidders despite signs of congestion.

189.00 remains a key but tricky level for the GBP/JPY to overcome, with prices capped below the target level and keeping the Guppy constrained below the major 190.00 handle. The pair continues to trade into firmly bullish territory with the 200-day SMA near 182.11, far below current price action. Guppy bids have not touched the long-term SMA since a decline into 179.00 at the start of 2024.

GBP/JPY hourly chart

GBP/JPY daily chart

• GBP/JPY gains positive traction and is supported by a combination of factors.
• A positive risk tone undermines the JPY and acts as a tailwind for spot prices.
• Bulls seem unaffected by the prospects of BoE rate interest rate cuts in 2024.

The GBP/JPY cross attracts some dip-buyers near the 186.15 area, or the weekly low touched this Wednesday and builds on the momentum through the first half of the European session. Spot prices climb to a fresh daily high in the last hour, with bulls now looking to extend the positive move beyond the 200-hour Simple Moving Average (SMA) and the 187.00 round-figure mark.

The prospect of an Israel-Hamas ceasefire raises hopes for a de-escalation of the crisis in the Middle East and boosts investors' confidence. This is seen as a key factor behind the safe-haven Japanese Yen's (JPY) relative underperformance. The British Pound (GBP), on the other hand, benefits from the ongoing US Dollar (USD) pullback from its highest level in almost three months. This, in turn, assists the GBP/JPY cross to gain some positive traction and rebound over 85 pips from the daily trough.

The GBP bulls, meanwhile, seem rather unaffected by the rising prospect of the Bank of England (BoE) reducing interest rates in 2024. In fact, BoE's chief economist Huw Pill said on Tuesday that the interest rate could drop this year as a reward to the economy for bringing down inflation. This comes on top of BoE Gornover Andrew Bailey's remarks last week, saying that things are heading in the right direction and that the current level of bank interest rate remains appropriate.

Bailey, however, signalled that the central bank was ready to start easing policy. Adding to this, BoE Deputy Governor Sarah Breeden said on Wednesday that she is less concerned that the bank rate might need to be tightened further and that her focus has shifted to how long rates need to remain at their current level. This, however, does little to cap the GBP/JPY cross, though the Bank of Japan’s (BoJ) hawkish tilt earlier this month might hold back bulls from placing fresh bets.

Technical levels to watch

• GBP/JPY trades flat around 186.31, within today's 186.18/186.77 range.
• Facing resistance at Tenkan-Sen (186.89), with 187.00 as next upside target.
• Crossing above 187.73 from last Friday could aim for 188.00 resistance.
• Dropping below this week’s low of 186.14 eyes 186.00, then Senkou Span A (185.36) and early February's 185.22 low.

The GBP/JPY is virtually unchanged during the North American session, with the pair consolidating within a tight 186.18/186.77 range on Tuesday. At the time of writing, the pair exchanges hands at 186.31.

 The cross-pair trades directionless, awaiting fresh market data, capped on the upside by the Tenkan-Sen at 186.89, ahead of the psychological 187.00 figure. If buyers reclaim last Friday's high of 187.73, that would pave the way to challenge 188.00.

Conversely, if sellers drag the exchange rate below the current week’s low of 186.14, the next demand zone would be the 186.00 mark. If selling pressure extends below that area, the next support would be the Senkou Span A at 185.36, ahead of the February 1 low of 185.22. once those levels are cleared, 185.00 is up next.

GBP/JPY Price Action – Daily Chart

GBP/JPY Technical Levels

• GBP/JPY drops over 0.50% to 186.32 amid cautious sentiment following Powell's rate cut hints.
• New lower low suggests further possible decline to 185.22, contingent on breaking below current supports.
• Recovery above Tenkan-Sen (186.89) could open path to resistances up to 189.00.

The GBP/JPY finished the North American session in negative territory, down more than 0.50%, after hitting a daily high of 187.61. A risk-off impulse following Federal Reserve Chair Jerome Powell's Sunday interview, in which he emphasized they would likely cut three times and begin to ease policy toward the first half of the year. At the time of writing, the pair exchanges hands at 186.32.

GBP/JPY edged lower on Monday, registering a lower low, which could open the door to test last week’s low of 185.22, but traders must clear the first support level seen at the 186.00 figure. Once cleared, the former would be up next, followed by the Kijun-Sen at 183.83.

Conversely, the pair could resume its uptrend if buyers regained the Tenkan-Sen at 186.89, followed by the 187.00 figure. A breach of the latter will expose the January 19 high at 188.93, followed by the 189.00.

GBP/JPY Price Action – Daily Chart

GBP/JPY Technical Levels

• GBP/JPY climbs 0.48% to 187.44, driven by positive market sentiment and Wall Street's peaks.
• Upward momentum seen, eyeing resistance at 188.00, with goals towards January 19 high of 188.93.
• Downside risks: possible pullback to Tenkan-Sen (187.06), with key supports at 187.00, then 185.44.

The GBP/JPY climbed late in the North American session, extending its gains courtesy of upbeat market sentiment as portrayed by Wall Street reaching new all-time highs. At the time of writing, the cross-pair is trading at 187.44, which is up 0.48%.

The daily chart suggests the pair is upward biased after GBP/JPY price action on February 1 formed a ‘hammer,’ exacerbating today’s rally to a new two-day high of 187.73. if buyers lift the exchange rate past the 188.00 figure, that could pave the way toward the January 19 high at 188.93 before challenging 189.00

Conversely, if GBP/JPY slumps below the Tenkan-Sen at 187.06, that could pave the way to challenge the 187.00 figure. Once those two levels are cleared, the next stop would be the Senkou Span A at 185.44, followed by the February 1 low of 185.22. Further downside is seen at 185.00.

GBP/JPY Price Action – Daily Chart

GBP/JPY Technical Levels