Pound Sterling retreats as Japanese Yen attracts modest buying
GBP/JPY trades on the back foot on Monday as the Japanese Yen (JPY) strengthens against its major peers. The Pound Sterling (GBP), meanwhile, lacks a fresh domestic catalyst as UK markets remain closed for the Summer Bank Holiday.
The Japanese Yen (JPY) gained modest support on Monday as it strengthened against major currencies, causing the Pound Sterling (GBP) to retreat. The GBP/JPY pair traded around 216.40, falling from an intraday peak of 216.85. The Yen attracted buying interest after USD/JPY briefly surpassed the psychologically significant 160.00 level, a threshold that previously prompted Japanese authorities to intervene in the foreign exchange market.
A record ¥15.4 trillion ($96.5 billion) in government spending between July 30 and August 26 bolstered the Yen, despite Japan's expansionary fiscal policies, high government debt, and low interest rates posing challenges for the currency. While the BoJ's hawkish expectations provide some support, the broader outlook remains uncertain due to the constraints on how rapidly and extensively the BoJ can raise rates.
Meanwhile, on the UK side, the Bank of England (BoE) is anticipated to keep interest rates unchanged in the near future, with inflation remaining above its 2% target. The economic calendar is quiet this week for both markets.
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