GBP/JPY edges higher on Thursday, reversing all the losses recorded on the previous day.
The move is largely driven by broad Japanese Yen (JPY) weakness rather than any major positive development for the British Pound (GBP), with a sparse economic calendar offering little fresh impetus
At the time of writing, the cross trades around 216.33, up 0.53% on the day. Despite expectations that the Bank of Japan (BoJ) could raise interest rates next month, the Yen stays under pressure. Higher Oil prices linked to the US-Iran standoff are a key near-term headwind, as Japan relies heavily on imported energy from the Middle East.
Broader concerns over government spending and high public debt also weigh on the currency. Meanwhile, UK inflation and labour-market figures released this week suggest that the Bank of England (BoE) will maintain its current policy stance and keep interest rates unchanged at 3.75%, well above the Bank of Japan’s 1% policy rate. From a trader’s perspective, the wide rate gap favours the higher-yielding British Pound and supports further upside in GBP/JPY.