GBP/JPY steadies around mid-202.00s amid BoJ uncertainty; UK fiscal concerns cap gains

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The GBP/JPY cross attracts some buyers near the 202.30-202.25 area during the Asian session on Monday, though it lacks follow-through.

GBP/JPY reverses a modest Asian session dip as BoJ uncertainty continues to underpin the JPY.
The UK’s fiscal concerns and BoE rate cut bets might cap any meaningful appreciation for the GBP.
Traders might also opt to move to the sidelines ahead of the latest BoE policy update on Thursday.

The GBP/JPY cross attracts some buyers near the 202.30-202.25 area during the Asian session on Monday, though it lacks follow-through. Spot prices remain confined in Friday's broader range and currently trade around mid-202.00s, nearly unchanged for the day amid relatively thin liquidity on the back of a holiday in Japan.

The Japanese Yen (JPY) continues to be undermined by the Bank of Japan (BoJ) rate hike uncertainty and turns out to be a key factor acting as a tailwind for the GBP/JPY cross. Investors seem convinced that the BoJ could resist further policy tightening amid speculations that Japan's Prime Minister Sanae Takaichi will pursue aggressive fiscal spending plans. Moreover, BoJ Governor Kazuo Ueda said last week that there are no preset ideas about the timing of the next rate hike. This, along with the underlying bullish sentiment across the global financial markets, keeps the safe-haven JPY depressed at the start of a new week.

Any meaningful JPY depreciation, however, seems limited in the wake of fears that government authorities could intervene to stem further weakness in the domestic currency. Apart from this, concerns about the UK's fiscal situation ahead of Finance Minister Rachel Reeves' Autumn budget on November 26 might hold back traders from placing aggressive bullish bets around the British Pound (GBP). This, along with expectations for more rate cuts by the Bank of England (BoE), contributes to capping the GBP/JPY cross, warranting some caution before positioning for a further upside ahead of the key central bank event risk.

The BoE is scheduled to announce its policy decision on Thursday amid a 1-in-3 chance of a 25 bps rate cut and a roughly 68% probability of a rate reduction by the year-end. Softer inflation and fiscal headwinds provide a greater scope to ease policy. Moreover, a further softening in wage growth and a rise in unemployment revived bets on an imminent rate cut. Hence, the outlook will play a key role in influencing the near-term GBP price dynamics and provide some meaningful impetus to the GBP/JPY cross. Nevertheless, the fundamental backdrop suggests that any subsequent move up is likely to be sold into.

(This story was corrected at 07:50 GMT to say in the second bullet point that BoE rate cut bets, not rate hike bets, might cap any meaningful appreciation for the GBP.)

Japanese Yen Price Last 7 Days

The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies last 7 days. Japanese Yen was the strongest against the British Pound.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.89%	1.38%	0.77%	0.02%	-0.22%	0.93%	1.02%
EUR	-0.89%		0.52%	-0.05%	-0.86%	-1.03%	0.04%	0.13%
GBP	-1.38%	-0.52%		-0.67%	-1.36%	-1.51%	-0.46%	-0.41%
JPY	-0.77%	0.05%	0.67%		-0.83%	-1.07%	0.04%	0.15%
CAD	-0.02%	0.86%	1.36%	0.83%		-0.30%	0.91%	0.96%
AUD	0.22%	1.03%	1.51%	1.07%	0.30%		1.07%	1.12%
NZD	-0.93%	-0.04%	0.46%	-0.04%	-0.91%	-1.07%		0.05%
CHF	-1.02%	-0.13%	0.41%	-0.15%	-0.96%	-1.12%	-0.05%

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).