• GBP/JPY bulls remain on the sidelines as BoJ rate hike bets and geopolitical risks benefit the JPY.
• The uncertainty over the timing of the next BoJ rate hike warrants some caution for the JPY bulls.
• The BoE’s relatively hawkish outlook could support the GBP and help limit losses for spot prices.

The GBP/JPY cross struggles to build on a modest Asian session uptick on Thursday and currently trades near the lower end of its daily range, just below the 211.00 mark. Spot prices, however, lack follow-through selling, warranting some caution before positioning for an extension of the recent pullback from the 212.15 region, or the highest level since August 2008, touched on Tuesday.

The US military attack on Venezuela over the weekend, followed by US President Donald Trump's confrontational rhetoric toward Colombia and Mexico, raised concerns about regional instability in Latin America. Adding to this, the White House said on Tuesday that Trump is discussing options for acquiring Greenland, including the potential use of the US military. This comes on top of the protracted Russia-Ukraine war and keeps geopolitical risks in play, offering some support to the safe-haven Japanese Yen (JPY).

Apart from this, the prospect for a further policy tightening by the Bank of Japan (BoJ) underpin the JPY amid intervention fears and turns out to be a key factor acting as a headwind for the GBP/JPY cross. Meanwhile, data released earlier today showed that Japan’s real wages fell in November at the fastest pace since last January. Moreover, investors remain uncertain about the likely timing of the next BoJ rate hike, which might hold back the JPY bulls from placing aggressive bets and help limit losses for the currency pair.

Furthermore, the Bank of England's (BoE) less dovish message, suggesting that rates are getting closer to neutral, might continue to support the British Pound (GBP) and the GBP/JPY cross. This, in turn, makes it prudent to wait for strong follow-through selling before confirming that the currency pair has topped out in the near term and positioning for any meaningful corrective decline. Moving ahead, there isn't any relevant market-moving economic data due for release from the UK, leaving spot prices at the mercy of JPY.