• GBP/JPY attracts some buyers for the second straight day, though it lacks bullish conviction.
• A weaker USD and the end of the UK budget uncertainty support the GBP and spot prices.
• The divergent BoE-BoJ policy expectations cap the cross and warrant some caution for bulls.

The GBP/JPY cross trades with a positive bias for the second straight day on Wednesday and climbs back above the 206.00 mark during the early part of the European session. Spot prices look to build on the overnight bounce from the vicinity of a one-week low, touched on Monday, though a combination of diverging forces warrants some caution for bullish traders.

The British Pound (GBP) draws some support from an end to the uncertainty surrounding the UK budget and a broadly weaker US Dollar (USD). This, in turn, is seen as a key factor acting as a tailwind for the GBP/JPY cross. However, firming expectations that the Bank of England (BoE) will cut interest rates later this month, amid softer inflation and a cooling labor market, hold back the GBP bulls from placing aggressive bets.

The Japanese Yen (JPY), on the other hand, continues with its relative outperformance on the back of the Bank of Japan's (BoJ) hawkish outlook and caps the GBP/JPY cross. In fact, BoJ Governor Kazuo Ueda said on Tuesday that the likelihood of the central bank's economic and price projections being met is rising. This was seen as the strongest signal that conditions for a rate hike were falling in place and underpins the JPY.

Apart from this, persistent geopolitical uncertainties stemming from the protracted Russia-Ukraine war and the risk of a further escalation of conflict benefit the JPY's safe-haven status. This further warrants caution before positioning for any meaningful appreciating move for the GBP/JPY cross. Traders now look forward to the release of the final UK Services PMI, which might influence the GBP and provide a fresh impetus.