10.02.202518:55 Forex Analysis & Reviews: GBP/JPY: Analysis and Forecast

The GBP/JPY pair is exhibiting a moderate intraday recovery, rising from levels last seen in September of last year and climbing above the key psychological level of 189.00, thereby breaking a three-day losing streak.

The recent tariff threats from U.S. President Donald Trump have reignited fears that Japan could also become a target for new trade duties, which is weighing on the yen and prompting some short covering in GBP/JPY. However, hawkish expectations from the Bank of Japan (BoJ) and concerns over a potential global trade war are preventing bears from aggressively entering safe-haven positions in the yen.

Bank of Japan's Director-General for Monetary Affairs, Kazuhiro Masaki, stated that the central bank will continue raising interest rates if core inflation reaches the 2% target. This view is supported by rising real wages in Japan for the second consecutive month, reinforcing the case for further monetary tightening by the BoJ.

At the same time, the Bank of England's outlook appears far less optimistic, highlighting the widening divergence in monetary policies between the two central banks. The BoE cut its benchmark interest rate by 25 basis points last week and downgraded its growth forecast for 2025. Additionally, BoE Governor Andrew Bailey hinted at further rate cuts this year, which could limit GBP/JPY's upward potential.

With no significant economic data today to confirm whether GBP/JPY has found a bottom, traders should wait for a strong buying signal before committing to long positions. A key event to watch will be BoE Governor Andrew Bailey's speech on Tuesday, which could significantly impact the British pound and provide fresh impetus for GBP/JPY.

And from a technical point of view, oscillators on the daily chart remain deeply in negative territory, reinforcing a bearish outlook for the GBP/JPY pair.