GBP/JPY Outlook:
Slightly positive, but likely to move sideways, as the rate remains above its recent average amid mixed signals.
Key drivers:
• Rate gap: The Bank of England's recent dovish stance contrasts with the Bank of Japan's earlier interest rate hike, which supports the yen.
• Risk/commodities: Rising oil prices are contributing to inflation concerns in both the UK and Japan, which could impact currency values.
• One macro factor: Ongoing UK political uncertainty could undermine the pound, as questions around Prime Minister Keir Starmer’s leadership persist.
Range:
Expect GBP/JPY to hold steady within its recent range, as pressures from both domestic uncertainties and global influences balance each other.
What could change it:
• Upside risk: A stronger-than-expected UK economic report could boost GBP sentiment.
• Downside risk: Continued political instability in the UK may further weaken the pound.
