The GBP/JPY currency pair is struggling to build on its modest gains during the Asian session, currently hovering just below the 191.00 mark, showing little movement for the day. Although the pair is managing to avoid significant downside, concerns linger as some selling pressure on the Japanese Yen (JPY) limits potential for further advances.
Investor sentiment remains cautiously optimistic despite ongoing mixed signals about US-China trade negotiations. Hopes for a de-escalation of tensions between the two largest economies in the world are supporting a positive risk outlook. This sentiment continues to weigh on the demand for traditional safe-haven assets, such as the JPY, which in turn offers some support to the GBP/JPY cross.
At the same time, expectations of an immediate interest rate hike by the Bank of Japan (BoJ) have been tempered due to rising economic risks posed by US tariffs. Nonetheless, persistent inflationary pressures in Japan have kept the door open for potential policy tightening by the BoJ later this year. This uncertainty is likely to cause JPY bears to tread cautiously ahead of the BoJ’s upcoming policy meeting.
Scheduled for Thursday, the BoJ is expected to keep interest rates unchanged, but its updated economic projections will be closely watched for indications on the timing of future rate hikes. These projections could significantly influence JPY dynamics in the short term and provide fresh momentum to the GBP/JPY pair.
Geopolitical risks, particularly from the ongoing Russia-Ukraine conflict, continue to limit JPY losses. Meanwhile, the British Pound (GBP) faces pressure from renewed buying interest in the US Dollar (USD), suggesting that any intraday gains in GBP/JPY could face resistance and remain capped.
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