The GBP/JPY pair extended its decline for the second consecutive day on Friday, stepping back from its recent peak near 206.15, last seen in August 2008. Currently hovering just above the psychological level of 205.00, the pair registered a decline of approximately 0.35% for the day. Market sentiment soured amid concerns that Japanese authorities, including the Bank of Japan (BoJ), might intervene to support the yen.
Earlier today, Japan’s Finance Minister Shunichi Suzuki emphasized close monitoring of stock and forex markets, expressing concerns over the impact of a weak Japanese yen on prices. Despite these remarks, substantial appreciation of the JPY remains unlikely due to the BoJ’s dovish stance, characterized by a lack of clear plans for reducing bond purchases or raising rates further. Moreover, the ongoing risk-on sentiment is expected to limit losses for the safe-haven yen and thereby restrain declines in the GBP/JPY cross.
On the British front, the GBP received a modest lift following exit polls indicating a potential landslide victory for the Labour Party in the UK general election. This outcome sets the stage for a Bank of England (BoE) rate cut in August, potentially acting as a headwind for both the pound and the GBP/JPY cross. Additionally, profit-taking ahead of the weekend was suggested by the overbought signal from the Relative Strength Index (RSI) on the daily chart.
Despite these factors, GBP/JPY appears on track to conclude the week in positive territory for the fourth consecutive week, highlighting persistent underlying strength amid broader market dynamics.
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