The GBP/JPY pair’s decline seems to be slowing down after three days of losses, hovering around the 198.00 mark during Thursday’s Asian trading session. Still, the outlook remains negative, especially with the recent US government shutdown that has enhanced the appeal of the Japanese yen as a safe haven.
This situation unfolded late Tuesday when the US government funding stopped because Republicans couldn’t get enough Democratic support for a funding suspension bill. As a result, investors have been seeking refuge in safer assets.
Additionally, the Japanese yen’s strength is bolstered by expectations that the Bank of Japan (BOJ) will start normalizing its monetary policy. The minutes from the September meeting indicate that the BOJ aims to raise interest rates if economic and inflation trends align with forecasts.
Interestingly, while the BOJ remains wary of a potential economic slowdown linked to US tariffs, officials believe that any negative impact will be temporary.
On another note, the British pound is facing considerable pressure. This is partly because of comments from Deputy Governor Briden of the Bank of England (BOE), who has expressed support for lowering interest rates. He mentioned that prolonged strong policies could risk keeping inflation below target.
Briden was among the seven members of the Monetary Policy Committee (MPC) who voted to keep interest rates steady at 4% during the policy meeting in September.
