• GBP/JPY consolidates its recent strong gains registered over the past two weeks or so.
• Intervention fears and BoJ rate hike bets underpin the JPY, capping gains for the cross.
• Hawkish BoE expectations and a softer USD benefit the GBP, and support spot prices.

The GBP/JPY cross reverses an intraday dip to sub-215.00 levels and climbs back closer to its highest level since July 2008 during the early European session on Tuesday. Moreover, the fundamental backdrop backs the case for an extension of the recent move up witnessed over the past two weeks or so.

Despite rising economic uncertainties from the Iran war, traders are still pricing in a greater chance of a Bank of Japan (BoJ) rate hike at the April policy meeting. This, along with speculations that Japanese authorities would step in to stem further weakness in the domestic currency, offers some support to the Japanese Yen (JPY) and acts as a headwind for the GBP/JPY cross. The JPY bulls, however, seem hesitant amid economic concerns stemming from external energy shocks due to the instability in the Strait of Hormuz.

Japan depends mostly on oil imports from the Middle East, and the uncertainty surrounding the strategic waterway continues to fuel worries that the economy will come under substantial strain in the foreseeable future. This, in turn, might cap gains for the JPY. The British Pound (GBP), on the other hand, benefits from a softer US Dollar (USD) and rising bets on Bank of England (BoE) rate hikes. In fact, traders are pricing in roughly 78 basis points (bps) of tightening in 2026, starting in April, which favors the GBP/JPY bulls.

This, along with the recent rebound from a technically significant 100-day Simple Moving Average (SMA), validates the near-term positive outlook, suggesting that the path of least resistance for spot prices remains to the upside. Hence, any corrective pullback might still be seen as a buying opportunity and is more likely to remain limited.