British Pound holds steady around 213.00 as fiscal concerns and rate gap undermine Yen
The GBP/JPY cross struggles to extend its positive move witnessed over the past three days and consolidates around the 213.00 mark, or the top end of its weekly range, through the early European session on Friday.
The British Pound (GBP) maintained a steady position near 213.00 against the Japanese Yen (JPY) on Friday, as fiscal concerns and an interest rate differential continued to weigh on the Yen. The GBP/JPY cross struggled to sustain its recent gains, trading around the top end of its weekly range. This consolidation comes despite Japan's government approving a plan to reduce the consumption tax on food by half, as well as cash transfers targeted at low- and middle-income households.
Rabobank analysts noted that these measures, while aimed at addressing high living costs and low consumer spending, have drawn criticism from both opposition parties and within the ruling Liberal Democratic Party (LDP). Meanwhile, the US Dollar (USD) retained its gains from the previous day, exerting some downward pressure on the GBP due to ongoing geopolitical uncertainties.
The interest rate gap between the UK and Japan, currently around 275 basis points (bps), remains supportive of the GBP/JPY cross, as a higher interest rate differential deters aggressive yen buying and supports the pound. Gold also showed a significant rally, surpassing $4,600 per troy ounce, while US Treasury yields continued to rise, impacting other currencies, including the Pound Sterling.
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