• GBP/JPY retreats slightly from the YTD peak amid a pickup in demand for the JPY.
• Intervention speculations and BoJ rate hike bets provide a modest lift to the JPY.
• The UK budget relief underpins the GBP and helps limit the downside for the cross.

The GBP/JPY cross reverses a major Asian session dip on Thursday and remains well within striking distance of its highest level since July 2024, touched the previous day. Spot prices currently trade below the 207.00 mark, down 0.10% for the day, though the near-term bias seems tilted in favor of bullish traders.

Investors remain alert amid the possibility that Japanese authorities could step in to stem any further weakness in the domestic currency. This, along with reviving bets for an imminent interest rate hike by the Bank of Japan (BoJ) in December, provides a modest lift to the Japanese Yen (JPY) and turns out to be a key factor that prompts some intraday selling around the GBP/JPY cross.

In fact, BoJ board member Asahi Noguchi reiterated earlier today that if economic activity and prices develop in line with the outlook, the central bank will gradually adjust the degree of monetary accommodation. Moreover, Japan's Services Producer Price Index suggested that inflation was on the cusp of durably meeting the 2% target and backs the case for a further BoJ policy tightening.

However, the prevalent risk-on environment, along with concerns about Japan's worsening fiscal position amid Prime Minister Sanae Takaichi’s pro-stimulus stance, acts as a headwind for the safe-haven JPY. The British Pound (GBP), on the other hand, gains traction on the back of the long-awaited UK budget, which offered a larger-than-expected fiscal buffer, and supports the GBP/JPY cross.

However, rising bets for an interest rate cut by the Bank of England (BoE) next month mark a big divergence in comparison to the BoJ's hawkish outlook. This might hold back traders from placing fresh bullish bets around the GBP/JPY cross. The market focus now shifts to the release of the latest consumer inflation figures from Tokyo, Japan's capital city, due during the Asian session on Friday.