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British Pound remains close to monthly peak vs Japanese Yen amid Mideast tensions

  • GBP/JPY regains positive traction on Wednesday and draws support from a combination of factors.
  • A modest USD downtick benefits the GBP, while economic concerns due to Iran risks weigh on the JPY.
  • Bulls seem rather unaffected by divergent BoJ-BoE expectations and JPY intervention speculations.

The GBP/JPY cross attracts some dip-buyers following the previous day's modest pullback from the 214.65-214.70 region, or a fresh monthly peak, and sticks to its modest intraday gains through the early European session on Wednesday. Spot prices currently trade around the 214.35-214.40 area, up 0.10% for the day, and seem poised to appreciate further amid a supportive fundamental backdrop.

The British Pound (GBP) benefits from a modest US Dollar (USD) downtick, which, along with the underlying bearish sentiment surrounding the Japanese Yen (JPY), validates the near-term positive outlook for the GBP/JPY cross. In fact, the JPY has been underperforming against major global currencies amid economic concerns stemming from the ongoing Middle East conflict and the continued disruptions to energy supplies.

In fact, shipping traffic through the critical Strait of Hormuz remains drastically reduced due to Iran's restrictions and the US naval blockade of Iranian ports. Furthermore, the US and Iran remain at odds over key issues, including Tehran's nuclear program and the strategic waterway. This keeps geopolitical risk premium in play and continues to undermine the JPY, despite hawkish Bank of Japan (BoJ) expectations.

BoJ Deputy Governor Himino Ryozo said on Tuesday that the central bank will continue to raise the policy rate based on economic activity, prices, and financial conditions. Even speculations that Japanese authorities will step in again to prop up the domestic currency do little to impress the JPY bulls, suggesting that the path of least resistance for the GBP/JPY cross is to the upside and backing the case for further gains.

Meanwhile, traders pushed back expectations for the likely timing of the next interest rate hike by the Bank of England (BoE) to December after the UK Consumer Price Inflation (CPI) unexpectedly slowed to the 2.8% YoY rate in April. Adding to this, the UK political chaos and growing calls for Prime Minister Keir Starmer to step down might hold back the GBP bulls from placing aggressive bets and cap the GBP/JPY cross.

Japanese Yen Price This Month

The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies this month. Japanese Yen was the strongest against the Canadian Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD0.75%1.15%1.77%1.78%0.73%0.60%0.48%
EUR-0.75%0.38%0.96%0.98%0.00%-0.12%-0.30%
GBP-1.15%-0.38%0.58%0.64%-0.40%-0.52%-0.69%
JPY-1.77%-0.96%-0.58%0.00%-1.03%-1.26%-1.33%
CAD-1.78%-0.98%-0.64%-0.00%-1.04%-1.27%-1.30%
AUD-0.73%0.00%0.40%1.03%1.04%-0.13%-0.30%
NZD-0.60%0.12%0.52%1.26%1.27%0.13%-0.17%
CHF-0.48%0.30%0.69%1.33%1.30%0.30%0.17%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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