British Pound finds support near weekly low as fiscal woes and rate gap weigh on Yen
- GBP/JPY finds some support in the vicinity of the weekly low, albeit it lacks bullish conviction.
- Japan’s economic woes and the wide UK-Japan rate differential continue to weigh on the JPY.
- A modest USD strength keeps GBP bulls on the back foot, capping the upside for spot prices.
The GBP/JPY cross recovers a few pips from the vicinity of the weekly trough, though it lacks follow-through buying and trades around mid-216.00s during the early European session on Thursday.
The Japanese Yen (JPY) continues its struggle to attract any meaningful buyers amid concerns about Japan's deteriorating fiscal position due to massive national debt and new spending plans. Adding to this, the wide interest rate gap between Japan and other major economies undermines the JPY, which, in turn, is seen as a key factor supporting the GBP/JPY cross.
The Bank of Japan (BoJ) increased its short-term policy rate to 1.00% in June, which is the highest level in 31 years. Meanwhile, the Bank of England (BoE) has maintained its benchmark rate at 3.75%, leaving a sizeable difference of around 275 basis points (bps). This keeps the so-called JPY carry trade and might continue to act as a tailwind for the GBP/JPY cross.
Strategists at Scotiabank highlight that the upcoming BoJ meeting is “currently priced for about 20bpts of tightening, offering some scope for additional near-term strength” in the JPY. However, they caution that “greater risk lies with the central bank’s tone as policymakers manage expectations for the rate path into year-end and into early 2027,” suggesting that guidance on the policy trajectory may prove more market-sensitive than the modest adjustment already anticipated.
Bulls, however, seem hesitant and opt to wait for the release of Tokyo consumer inflation figures on Friday. Moreover, a firmer US Dollar (USD) is seen undermining the British Pound (GBP) and capping the GBP/JPY cross. This, in turn, warrants some caution before positioning for the resumption of the well-established uptrend witnessed since the beginning of this month.
Japanese Yen Price This Month
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies this month. Japanese Yen was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.07% | -0.88% | -0.08% | -0.90% | -2.12% | -1.02% | 0.12% | |
| EUR | 1.07% | 0.17% | 0.97% | 0.18% | -1.06% | 0.05% | 1.20% | |
| GBP | 0.88% | -0.17% | 0.84% | 0.03% | -1.25% | -0.12% | 1.03% | |
| JPY | 0.08% | -0.97% | -0.84% | -0.79% | -2.18% | -1.14% | 0.14% | |
| CAD | 0.90% | -0.18% | -0.03% | 0.79% | -1.27% | -0.58% | 1.08% | |
| AUD | 2.12% | 1.06% | 1.25% | 2.18% | 1.27% | 1.15% | 2.33% | |
| NZD | 1.02% | -0.05% | 0.12% | 1.14% | 0.58% | -1.15% | 1.16% | |
| CHF | -0.12% | -1.20% | -1.03% | -0.14% | -1.08% | -2.33% | -1.16% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).