The GBP/JPY exchange rate has recently shown signs of volatility, reaching 7-day highs near 199.2, which is 1.6% higher than its 3-month average of 196.1. This relatively stable price movement has occurred within a 4.8% range, from 190.4 to 199.6. Recent forecasts from analysts indicate that the British pound (GBP) has faced significant downward pressure, culminating in its worst monthly performance in nearly two years by the end of July. Concerns surrounding the UK’s fiscal health and lackluster economic data have led to a bearish sentiment among investors.
The UK's economic outlook remains cloudy, particularly if upcoming manufacturing PMI results confirm ongoing contractions within the factory sector. This economic backdrop is likely to hinder any potential support for the pound in the near term, with analysts suggesting that the GBP may struggle against other currencies, including the Japanese yen (JPY).
In contrast, the Japanese yen has been influenced by cautious signals from the Bank of Japan (BoJ) regarding its monetary policy. While strong inflation data has ignited speculation of potential policy tightening by October, persistent geopolitical tensions and political uncertainty continue to weigh on the yen. Economic forecasts reveal a mixed outlook for Japan, with recent data indicating a contraction in Q1. This has contrasted with slight improvements in consumption and inventory levels, further complicating the BoJ’s path toward normalisation.
The current performance of oil prices, trading at $72.53—6.7% above its 3-month average—could also impact the yen, given Japan's reliance on imported energy. Analysts note that fluctuations in oil prices can significantly affect the JPY, particularly in the context of its safe-haven status during periods of global economic uncertainty.
Overall, the exchange rate forecasts for GBP/JPY will largely be determined by the interplay of UK economic recovery and BoJ policy decisions, alongside global market sentiment. As investors continue to monitor developments in trade agreements, inflation dynamics, and geopolitical risks, the trajectory of both currencies remains uncertain, warranting careful consideration during international transactions.