GBP/JPY Outlook:
Slightly weaker, but likely to move sideways, as the rate is below its recent average and near recent lows with limited driving forces.
Key drivers:
- Rate gap: The Bank of England's recent dovish stance contrasts with the Bank of Japan's rate hike, creating a widening rate differential that pressures the GBP.
- Risk/commodities: Oil prices are currently trending above their recent average, which typically strengthens the JPY due to Japan's reliance on imports; this increases demand for the yen.
- One macro factor: Ongoing UK political uncertainty and anticipation of GDP data are leading to cautious positions among GBP traders, impacting its strength.
Range:
The GBP/JPY is likely to drift within its recent range, as it tests the 30-day lows while remaining just above the 3-month average.
What could change it:
- Upside risk: A stronger-than-expected GDP report may boost GBP confidence.
- Downside risk: Further developments in UK political instability could heighten pressure on the pound.