GBP/JPY remains around the 198.00 mark after recovering from a previous low of 197.50. The Yen’s weakness is attributed to Japan’s August Unemployment Rate increasing to 2.6%, surpassing the expected 2.4% and rising from 2.3% in July.
The British Pound has difficulty gaining momentum as the UK Composite PMI fell to 50.1, a five-month low, while the Services PMI dropped to 50.8. GBP/JPY halts a four-day decline, stabilising near 198.00, after reaching its lowest point since August 7.
Technical Analysis
Technical analysis shows GBP/JPY attempting to maintain levels above 198.00. A breakdown below this may target the previous low of 197.50, while resistance around 198.50 aligns with the 21-period Simple Moving Average.
The Japanese Yen’s value is affected by various factors, including Japan’s economic performance, the Bank of Japan’s policies, and differences in bond yields between Japan and the US. The Yen is often viewed as a safe-haven asset, gaining strength during market stress.
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We see the GBP/JPY cross currently stuck, with both currencies showing signs of weakness. The UK’s slowing economy, reflected in the September 2025 composite PMI dropping to a five-month low of 50.1, is weighing on the Pound. This suggests that option traders could consider selling call spreads above the 199.00 resistance level to bet on limited upside potential.
The Economic Outlook
The Bank of England’s last meeting in September 2025 held rates at 4.75%, but the minutes revealed growing concern over the economic slowdown. This dovish tilt means any rallies in the Pound may be short-lived and present selling opportunities. For traders, this reinforces the idea that the path of least resistance for the pair is to the downside over the next few weeks.
On the other side, the Yen is not showing much strength either, given Japan’s unemployment rate just rose to 2.6%. We also note that Japan’s core CPI for August 2025 came in at 2.7%, which, while still above the Bank of Japan’s target, is cooling from the highs seen earlier in the year. This gives the BoJ room to be very gradual in unwinding its loose monetary policies, capping the Yen’s strength for now.
The main wildcard is the ongoing US government shutdown, which is increasing demand for safe-haven assets. We remember the 35-day shutdown in late 2018 and early 2019, which boosted the Yen significantly against other currencies. A break below the 197.50 support level could trigger a sharp move down, making protective put options an attractive strategy to hedge against a sudden rush into the Yen.
