The GBP/JPY currency pair has turned negative for the second consecutive day, following a brief uptick during the Asian session that saw it reach the 188.75 level. Spot prices have since fallen below the 188.00 mark, hitting a three-day low, with the pair appearing vulnerable to further declines as the Japanese Yen (JPY) remains supported by persistent buying interest.
Investor sentiment has been weighed down by ongoing uncertainties surrounding U.S. President Donald Trump’s proposed steep tariffs, raising concerns that the volatile trade war could push the global economy into recession. Adding to the cautious outlook, speculation about a potential U.S.-Japan trade deal and expectations that the Bank of Japan (BoJ) will continue to raise interest rates have contributed to the strength of the JPY, exerting downward pressure on the GBP/JPY pair.
Reports suggest that the BoJ is set to signal next week that it sees little need to alter its current stance on interest rate hikes, despite concerns over the potential impact of U.S. tariffs. This comes after Japan’s core Consumer Price Index (CPI) showed accelerated inflation in March, signaling broader price pressures within the economy.
In contrast, traders are increasingly betting on the Bank of England (BoE) lowering interest rates, fueled by growing concerns about the economic impact of Trump’s trade tariffs. This divergence in policy expectations between the BoJ and the BoE further underscores the downward pressure on GBP/JPY. However, ongoing weakness in the U.S. dollar is providing some support for the British Pound (GBP), potentially limiting further losses for the currency pair.
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