Anna 
For the second consecutive day on Wednesday, GBP/JPY continued its downward trend, remaining below the 185.00 psychological level during the early European trading session. Nevertheless, the spot price remains within the broader trading range from the previous day, with traders awaiting potential catalysts from Bank of England (BoE) Governor Bailey’s upcoming speech.
Simultaneously, the BoE’s outlook for the UK economy remains bleak, warning that the UK economy is on the brink of a recession and will not see meaningful growth in the coming years. This continues to weigh down on the performance of the British Pound. Furthermore, Huw Pill, the Chief Economist of the Bank of England, indicated on Monday that the risk of an overly sluggish trajectory is high and added that current market pricing for the first rate cut in August 2024 does not appear entirely unreasonable. These factors have contributed to the downward pressure on GBP/JPY. However, the more dovish stance adopted by the Bank of Japan appears to have cushioned the downside potential for the pair.
In fact, Bank of Japan Governor Haruhiko Kuroda stated earlier this week that Japan is making progress toward achieving its 2% inflation target but not enough to exit the ultra-loose policy. Kuroda also emphasized the uncertainty surrounding whether small businesses will raise wages next year. However, on Wednesday, Kuroda mentioned during a parliamentary speech that the central bank doesn’t need to wait for wage growth to turn positive after inflation adjustment before ending the ultra-loose monetary policy. He added that wages and inflation need to rise in tandem for the Bank of Japan to consider exiting the ultra-loose policy, which has been in place for a decade.
Given the mixed fundamental backdrop described above, caution should be exercised before heavily entering into GBP/JPY positions. However, the prevailing cautious market sentiment and Japanese authorities’ interventions in the forex market to counter ongoing speculation about the depreciation of the Japanese Yen (JPY) may provide some support for the safe-haven currency, which, in turn, could temper any intraday price surges.
