The currency pair drops for a second day amid speculation Japan may intervene to support the JPY, capping losses near 218.00.
The GBP/JPY cross declined for a second consecutive session, retreating from a 16-year peak near 219.00 reached earlier in the week. Spot prices slipped below the mid-218.00s in early European trading, pressured by expectations of potential Japanese intervention to bolster the JPY.
Traders remain cautious as the Bank of Japan’s policy rate sits at 1.0%, 275 basis points below the Bank of England’s 3.75%, sustaining JPY carry trades. Broader UK economic optimism and reduced political risks may limit further downside, though USD strength adds headwinds.
Market focus remains on Tokyo’s next moves, with geopolitical risks in the Middle East also capping JPY gains. The pair’s downside appears restrained for now, but bearish bets remain risky.