• GBP/JPY remains under some selling pressure for the second straight day on Wednesday.
• BoJ rate hike bets and safe-haven flows benefit the JPY, exerting pressure on the cross.
• The BoE’s hawkish outlook supports the GBP and helps limit the downside for spot prices.

The GBP/JPY cross attracts some sellers for the second straight day on Wednesday and trades around mid-210.00s, closer to the weekly trough during the Asian session. Spot prices, however, remain within striking distance of the highest level since August 2008, touched on Monday. Moreover, the fundamental backdrop warrants some caution before positioning for any meaningful corrective decline.

The Japanese Yen (JPY) gets a minor lift following the release of the Bank of Japan's (BoJ) October policy meeting Minutes, which showed a broad agreement that the central bank should continue raising rates if economic price forecasts materialize. At the subsequent meeting in December, the BoJ raised the policy rate to 0.75%, or a 30 year high, and left the door open to further tightening. This, along with persistent geopolitical uncertainties, benefits the JPY's safe-haven status and exerts some pressure on the GBP/JPY cross.

Meanwhile, the British Pound (GBP) draws support from the Bank of England's (BoE) hawkish rate cut last Thursday. A close 5-4 MPC vote split to lower the benchmark interest rate by 25 basis points (bps) to 3.75% pointed to differences within the committee, especially after last week's inflation surprise. This, in turn, forced investors to scale back their expectations for more aggressive easing next year, which acts as a tailwind for the GBP. Apart from this, a positive risk tone might cap the JPY and support the GBP/JPY cross.

Hence, it will be prudent to wait for strong follow-through selling before confirming that spot prices have topped out in the near term and placing aggressive bearish bets amid the year-end thin trading. Traders now look to BoJ Governor Kazuo Ueda's speech on Thursday for cues about the future policy path. Apart from this, Friday's release of Tokyo CPI, along with other important macro data from Japan, will play a key role in influencing the near-term JPY price dynamics and provide some meaningful impetus to the GBP/JPY cross.