GBP/JPY Weakens as Yen Gains Support Amid Technical Pressure

Key Moments

Risk-Off Mood Favors Yen, Pressuring GBP/JPY

GBP/JPY trades lower around 208.80 during the European session on Monday, a decline of 0.11%. The cross is under pressure as the Japanese Yen benefits from a rise in safe-haven demand after the United States Supreme Court ruled against President Donald Trump’s tariff policy, prompting investors to move toward perceived lower-risk assets.

Beyond the immediate risk-off tone, market expectations that the Bank of Japan could move toward higher interest rates in the near term are also lending support to the Yen and weighing on the GBP/JPY pair.

Pound Supported by Strong UK Data

Despite the pullback in GBP/JPY, the Pound Sterling remains broadly firm, supported by recent United Kingdom macroeconomic releases. Data published on Friday showed that UK Retail Sales, a key indicator of consumer spending, unexpectedly rose 1.8% month-on-month in January, compared with a 0.4% increase in December.

The flash S&P Global Purchasing Managers’ Index readings for February also surprised to the upside. The UK Composite PMI printed at 53.9, up from 53.7 in January, defying expectations for a decline to 53.4. These figures signal continued resilience in UK economic activity.

Focus on BoE’s Taylor for Policy Signals

During Monday’s session, investors are watching for remarks from Bank of England Monetary Policy Committee member Alan Taylor, who is scheduled to speak in a fireside chat at Deutsche Bank. Market participants will scrutinize his comments for guidance on the future path of UK interest rates.

Alan Taylor was among four MPC members who previously voted in favor of a 25 basis point rate cut, making his views particularly relevant for traders assessing the likelihood and timing of any policy easing.

Technical Picture: Downside Bias Persists

At the time of writing, GBP/JPY is trading near 208.80, sitting below the declining 20-day Exponential Moving Average, which stands at 210.18. This positioning keeps a bearish bias in place, as the falling 20-day EMA highlights persistent selling pressure on rallies.

The 14-day Relative Strength Index has bounced back above the 40.00 level after spending time in the 20.00-40.00 band, indicating that downside momentum has moderated. Nonetheless, the broader technical backdrop remains negative.

If the pair fails to hold above the February 17 low at 207.24, further weakness could open the way toward the December 5 low at 206.20.

(The technical analysis of this story was written with the help of an AI tool.)

Event Detail: BoE’s Taylor Speech

Alan Taylor became an external member of the Bank of England’s Monetary Policy Committee in September 2024 for a three-year term. He is an economist and Professor of International and Public Affairs at Columbia University. His prior experience includes roles as a senior advisor at Morgan Stanley, PIMCO and McKinsey. He is also a research associate of the National Bureau of Economic Research and a research fellow of the Centre for Economic Policy Research.