GBP\/JPY rose for a third day on Monday and traded near 211.70. Movement has been driven by changing BoE and BoJ rate expectations, with limited fresh UK or Japan data.<\/p>\n
Before the Iran conflict escalated, markets priced about an 80% chance of a BoE rate cut at the 19 March meeting and another cut later in the year. Money markets now price about a 50% chance of a BoE rate hike by year end, according to Bloomberg.<\/p>\n
The Yen stayed weaker as markets expect the BoJ to tighten policy slowly, with higher energy costs a risk for Japan\u2019s growth. BoJ Governor Kazuo Ueda said rates will rise if forecasts are met, while monitoring Middle East effects.<\/p>\n
Japan\u2019s government is weighing steps funded by emergency reserves to limit petrol price rises. Japan also told a national oil reserve site to prepare for a possible crude release, Nikkei reported.<\/p>\n
Japan\u2019s Labour Cash Earnings rose 3% year on year in January, up from 2.4% in December. The Current Account surplus was \u00a5941.6 billion versus \u00a5960 billion expected, down from \u00a57,288 billion.<\/p>\n
Japan\u2019s Q4 GDP (QoQ) is due Tuesday and PPI on Wednesday. UK January GDP is due Friday, alongside industrial and manufacturing output and consumer inflation expectations.<\/p>\n
The sharp rise in GBP\/JPY we saw in early 2025, driven by the US-Iran conflict’s effect on oil prices, has set the stage for the current environment. That conflict pushed Brent crude above $115 per barrel last year, forcing the Bank of England to pivot away from expected cuts and instead deliver two rate hikes, bringing the Bank Rate to 5.75%. As of today, with GBP\/JPY trading near 218.50, the key question is whether that policy divergence can continue to drive the pair higher.<\/p>\n
Looking at the Pound, recent data suggests the inflationary pressures from last year’s energy shock are finally easing. The latest CPI figures for February 2026 showed inflation falling to 3.5%, down significantly from its 2025 peak but still well above the 2% target. This puts the Bank of England in a holding pattern, making further rate hikes unlikely but keeping immediate rate cuts off the table, which suggests volatility in the Pound could decline.<\/p>\n
Meanwhile, the situation in Japan is shifting, creating a potential risk for those holding long GBP\/JPY positions. After a long delay due to last year’s global uncertainty, the Bank of Japan finally raised its policy rate to 0.10% in late 2025. More importantly, preliminary results from this year’s “Shunto” wage negotiations are showing average pay increases of around 4.1%, a multi-decade high that adds significant pressure on the BoJ to normalize policy further.<\/p>\n
Given these dynamics, the one-way upward trend in GBP\/JPY may be maturing. Derivative traders should consider protecting profits on long positions, perhaps by purchasing put options to hedge against a potential reversal if the Bank of Japan signals a more hawkish stance. The wide interest rate differential that has fueled this trade for so long is now more likely to narrow than to widen further.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" GBP\/JPY neared 211.70 as shifting BoE-BoJ rate expectations weakened Yen; Middle East tensions boosted volatility.<\/p>\n","protected":false},"author":103,"featured_media":17048,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-51048","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/51048","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/103"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=51048"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/51048\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17048"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=51048"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=51048"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=51048"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}