GBP/JPY fell 0.11% to near 208.80 in European trading on Monday. The Japanese Yen strengthened after the US Supreme Court ruled against President Donald Trump’s tariff policy, raising demand for safer assets.
The Yen also gained as markets priced in a possible Bank of Japan rate rise in the near term. The Pound stayed broadly firm after stronger UK data.
February 2025 Market Backdrop
UK Retail Sales for January rose 1.8% month-on-month, up from 0.4% in December. The flash S&P Global UK Composite PMI for February rose to 53.9 from 53.7, against expectations of 53.4.
Traders are watching comments from Bank of England MPC member Alan Taylor in a fireside chat at Deutsche Bank. Taylor was one of four members who voted for a 25 basis point rate cut.
On the chart, price is below the falling 20-day EMA at 210.18. The 14-day RSI moved back above 40.00 after trading in the 20.00–40.00 zone.
If the pair breaks below the 17 February low of 207.24, it may test the 5 December low of 206.20. The analysis note says an AI tool helped write the technical section.
Options Strategies Considered
Looking back at the situation in February 2025, we saw a clear tug-of-war in the GBP/JPY pair. The Japanese Yen was gaining strength on safe-haven demand after a US Supreme Court ruling on tariffs, while strong UK economic data supported the Pound. The UK Composite PMI figure of 53.9 was particularly notable, as it continued a trend from late 2024 where the services sector showed surprising resilience.
The key driver for the Yen at that time was the growing expectation of a Bank of Japan (BoJ) policy shift. We recall that markets were pricing in a high probability of the BoJ ending its negative interest rate policy by April 2025, especially as core inflation in Tokyo had remained above the 2% target for over a year. This anticipation was a significant factor putting downward pressure on GBP/JPY.
Meanwhile, the robust UK retail sales and PMI data were creating a floor under the pair, preventing a sharper fall. However, we were cautious due to the upcoming comments from dovish Bank of England member Alan Taylor. Any hint from him about future rate cuts would have weakened the Pound and aligned with the bearish technical picture.
Given the declining 20-day moving average acting as resistance, we saw opportunities in selling any rallies toward the 210.00 level. For derivative traders, buying put options with a strike price near 207.00 and an expiry in late March 2025 was a straightforward strategy. This allowed for profiting from a potential drop towards the 206.20 target while clearly defining the maximum risk.
An alternative approach we considered was a bear put spread to lower the cost of entry, which seemed prudent given the Pound’s underlying strength. This involved buying a put option with a strike around 208.00 and simultaneously selling another put at a lower strike, such as 206.50. This strategy was designed to profit from a modest decline in the pair over the following weeks.
