• GBP/JPY trades near one-week highs as traders digest mixed UK and Japan PMI data.
• UK Services PMI falls into contraction territory, while Japanese services activity stalls after 13 months of growth.
• Traders now turn their attention to Japan’s National CPI and the United Kingdom’s Retail Sales data, both due on Friday.

The British Pound (GBP) weakens against the Japanese Yen (JPY) on Thursday as traders digest the latest preliminary PMI data from both the United Kingdom and Japan. At the time of writing, GBP/JPY is trading around 213.40, hovering near one-week highs.

In the United Kingdom, preliminary S&P Global PMI data showed the Composite PMI fell to 48.5 in May from 52.6 in April, marking a 13-month low and signaling the first contraction in private-sector activity since April 2025. The Services PMI dropped sharply to 47.9 from 52.7 previously, its lowest level in 64 months, while the Manufacturing PMI came in at 53.7, matching the previous reading and beating market expectations of 53.0.

Data released earlier in the Asian session showed Japan’s Jibun Bank Manufacturing PMI eased to 54.5 in May’s preliminary reading from 55.1 in April, matching market expectations. Meanwhile, the Services PMI declined to 50.0 in May from 51.0 previously, signaling that activity in the services sector stalled after 13 consecutive months of growth.

The mixed PMI readings from both economies kept GBP/JPY largely range-bound on Thursday, while traders also monitored developments surrounding US-Iran negotiations. Reuters reported earlier in the day that Iran’s Supreme Leader ordered that near-weapons-grade uranium must remain inside the country.

The report complicated hopes for a near-term breakthrough, as curbing Iran’s nuclear programme remains one of the US’s main demands.

Against this backdrop, Oil prices remained elevated as the Strait of Hormuz stayed largely closed. Japan’s heavy dependence on energy imports from the Middle East continued to weigh on the Yen. However, with USD/JPY moving back near the 160.00 level, fears of possible intervention from Japanese authorities kept traders cautious about aggressive Yen selling.

Looking ahead, the outlook for GBP/JPY remains tilted to the upside as the wide interest rate differential between the Bank of England (BoE) and the Bank of Japan (BoJ) continues to favor Sterling. Ongoing Oil-driven inflation risks linked to tensions in the Middle East could further widen the policy divergence, as central banks face growing pressure to keep monetary policy tighter for longer.

Traders now turn their attention to Friday’s key economic releases, including Japan’s National Consumer Price Index (CPI) data and the United Kingdom’s Retail Sales figures.