• GBP/JPY retreats slightly after refreshing its YTD peak on Friday, though it lacks follow-through.
• Intervention fears and BoJ rate hike bets underpin the JPY and cap the upside for spot prices.
• The end of the UK budget uncertainty offsets BoE rate cut bets and offers support to the cross.

The GBP/JPY cross attracts some intraday sellers following an Asian session uptick to the 207.20 area, or a fresh high since July 2024, and turns lower for the second straight day on Friday. The downtick, however, lacks bearish conviction, with spot prices holding above mid-206.00s and remaining on track to register strong gains for the third straight week.

The latest consumer inflation figures from Tokyo, released earlier today, pointed to still sticky inflation in Japan's capital city and validates hawkish Bank of Japan (BoJ) expectations. In fact, reports earlier this week suggested that the BoJ is preparing markets for a possible interest rate hike as soon as next month. Furthermore, investors remain alert amid speculations that Japanese authorities could step in to stem any further weakness in the domestic currency. This, in turn, is seen underpinning the Japanese Yen (JPY) and acting as a headwind for the GBP/JPY cross.

The British Pound (GBP), on the other hand, struggles to attract any meaningful buyers as the US Dollar (USD) looks to build on the overnight bounce from a one-and-a-half-week low. Apart from this, rising bets for an interest rate cut by the Bank of England (BoE) next month, which marks a significant divergence in comparison to the BoJ outlook, contribute to capping the GBP/JPY cross. That said, an end to the uncertainty surrounding the UK budget and an upwardly revised UK growth forecast for 2025 might hold back the GBP bears from placing aggressive bets.

In fact, the UK Office for Budget Responsibility (OBR) predicts the economy will expand by 1.5% this year, higher than its previous estimate of 1%. Adding to this, UK Chancellor Rachel Reeves said the government had beaten the growth forecast this year and added that it will beat them again. Moreover, concerns about Japan's deteriorating fiscal condition on the back of the government's massive economic package, along with the risk-on mood, could cap the safe-haven JPY. This warrants caution before confirming that the GBP/JPY cross has topped out.

(This story was corrected on November 28 at 07:02 GMT to say in the second paragraph that intervention fears is underpinning the Japanese Yen, not undermining.)