The GBPJPY exchange rate has seen selling at the 195.98 level and a correction is possible.
The price of GBPJPY has tried to breach this resistance on three occasions since March and bulls may throw in the towel here. The 192 level looks to be the first target for further weakness.
Data released at 2pm HKT will be the British consumer price index, with economists expecting a figure of 0.2% after 1.2% in the month prior. That could be bearish for the pound if a deflationary consumer takes hold.
There were no surprises from the Bank of Japan on Tuesday, with the central bank holding its short-term interest rate steady at 0.5%. The rate still hovers at the highest level since 2008, and that took some steam out of the British pound at the recent resistance level.
If markets were looking at a Japanese rate cut due to tariffs, then they may not reduce any bearish bets on the yen.
Governor Ueda said that inflation expectations were not yet at the 2% level and talked of concern about tariffs affecting future wages. This dovish message was “caution, caution, caution,” and may not see a central bank rate cut in Japan until 2026.
On the bond market, the Japanese government will commit to reducing purchases by JPY 400 billion each quarter through Q2 2026, despite recent market issues. However, the Bank said it would cut that in half to JPY 200 billion every quarter through Q2 2027.
