GBP/JPY climbs back to 200.00, remains close to over one-year peak touched last week

GBP/JPY attracts fresh buyers on Monday amid a combination of supporting factors.
The upbeat market mood undermines the safe-haven JPY amid the BoJ uncertainty.
The GBP benefits from last week’s upbeat UK GDP and further supports spot prices.

Haresh Menghani FXStreet

The GBP/JPY cross regains positive traction at the start of a new week and climbs back closer to the 200.00 psychological mark during the Asian session. Moreover, spot prices remain close to an over one-year high touched last week and could appreciate further amid a combination of supporting factors.

The high-stakes meeting between US President Donald Trump and Russian leader Vladimir Putin in Alaska yielded no clear breakthrough, though investors remain hopeful about the chances of ending the prolonged war in Ukraine. This further boosts investors' appetite and undermines the safe-haven Japanese Yen (JPY). The British Pound (GBP), on the other hand, continues to draw support from last week's upbeat UK GDP print, which turns out to be another factor acting as a tailwind for the GBP/JPY cross.

Data released last Thursday showed that the UK economy expanded at a quarterly rate of 0.3% in the three months to June 2025. This marked a notable deceleration from a 0.7% growth in the first quarter, though it was well above the market forecast of 0.1%. This, in turn, forced traders to push back their expectations for the next rate cut by the Bank of England (BoE) to November. This, however, still marks a significant divergence in comparison to bets for an imminent rate hike by the Bank of Japan (BoJ) later this year.

In fact, data released last Friday showed that Japan's economy expanded more than expected in the second quarter despite US tariff headwinds. This, along with an upward revision of the BoJ's inflation forecast, reaffirmed market speculations that the BoJ will stick to its policy normalization path despite domestic political uncertainty. Hence, it will be prudent to wait for strong follow-through buying before positioning for an extension of the GBP/JPY pair's well-established uptrend witnessed over the past two weeks or so.

Pound Sterling FAQs

What is the Pound Sterling?

The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).

How do the decisions of the Bank of England impact on the Pound Sterling?

The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.

How does economic data influence the value of the Pound?

Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.

How does the Trade Balance impact the Pound?

Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

Author

Haresh Menghani

FXStreet

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

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