Weaker JPY and softer UK inflation data lift the cross, though BoE caution and potential Japanese intervention limit gains.
The GBP/JPY cross rose to a one-month high in early European trading but remained below the 215.00 level amid concerns over potential Japanese currency intervention. Buyers stepped in as Japan’s corporate capital spending stagnated in Q1, missing expectations and slowing sharply from a 6.5% YoY rise in Q4 2025.
Market expectations for a Bank of England rate hike shifted to December after softer UK inflation and a surprise rise in unemployment. BoE Governor Andrew Bailey indicated no urgency to tighten policy, citing geopolitical risks and weak UK growth. Meanwhile, Middle East tensions and energy supply disruptions weighed on the JPY, supporting the USD/JPY pair.
Speculation that Japanese authorities may intervene to support the JPY deterred aggressive short positions, capping further upside in GBP/JPY. Traders remain cautious amid the mixed fundamental backdrop.