British Pound advances to two-week high as rate gap and fiscal woes undermine Yen
The GBP/JPY cross climbs to a nearly two-week high, around the 215.35-215.40 area, during the first half of the European session on Wednesday and looks to prolong its recent solid recovery from the lowest level since early March, touched last week.
The GBP/JPY cross reached nearly two weeks high, hovering around 215.35-215.40, during the first half of Wednesday's European trading session. This marks a solid recovery from the lowest level since early March. The Japanese Yen (JPY) has lost a significant amount of its recent gains due to structural headwinds, despite a rare joint US-Japan intervention.
Even though the Bank of Japan raised interest rates to the highest level since 1995, Japan's borrowing costs remain much lower than those of other major economies, such as the UK. This keeps the carry trade active, which continues to weaken the JPY and benefits the GBP/JPY cross. Concerns over Japan's deteriorating fiscal situation, driven by Prime Minister Sanae Takaichi's aggressive economic stimulus and tax cuts, also contribute to the weakening of the Yen.
Additionally, worries about energy disruptions caused by the Iran war add to the negative pressure on the JPY, preventing it from finding any respite from the potential for another BoJ rate hike in September. While traders may refrain from making aggressive bullish bets on the British Pound (GBP) and decide to wait for the UK macro data release, including the preliminary Q2 GDP report on Thursday, the overall positive outlook for the GBP/JPY cross remains.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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