Key Moments
- GBP/JPY trades around 212.25, hovering close to its highest level in roughly one month.
- Heightened US-Iran tensions and risks to oil flows through the Strait of Hormuz weigh on the Yen and support a geopolitical risk premium in crude.
- Shifts in rate expectations for the BoE and BoJ, along with mixed UK and Japanese data, shape the cross-currency backdrop.
Safe-Haven Yen Softens on Middle East Energy Concerns
GBP/JPY is trading higher on Tuesday, supported by weakness in the Japanese Yen (JPY) as investors react to the ongoing US-Iran conflict and potential risks to energy shipments through the Strait of Hormuz. These concerns are particularly important for Japan, which is heavily dependent on imported Oil.
At the time of writing, GBP/JPY is quoted near 212.25, placing the pair close to a one-month peak.
Japan sources about 95% of its crude oil imports from the Middle East, with approximately 70% of those supplies transiting the Strait of Hormuz. Any extended disruption or further escalation of geopolitical tensions in that corridor could exert additional pressure on Japan’s economic outlook.
Oil Risk Premium Persists Despite Sharp Price Drop
Ongoing supply disruptions have contributed to a geopolitical risk premium in Oil prices. However, crude prices dropped sharply on Monday. WTI declined by 5.84%, while Brent fell by 3.69%, after US President Donald Trump said, “I think the war is very complete, pretty much.”
Global policymakers have moved to reassure energy markets. G7 countries are in discussions over a coordinated release of strategic oil reserves via the International Energy Agency (IEA).
Japan’s Trade Minister Akazawa stated that the country supports the IEA’s proposal for a joint release of oil reserves. In addition, G7 Energy Ministers are scheduled to meet later on Tuesday to discuss the situation.
Despite Monday’s pullback in prices, Oil remains elevated as the US-Iran conflict broadens with airstrikes across the Middle East. This has reignited worries about global inflation, adding complexity to the policy outlook for major central banks.
Monetary Policy Expectations Support the Pound
The British Pound (GBP) is receiving modest backing as traders scale back expectations for a Bank of England (BoE) interest rate cut in March. Market pricing had earlier assigned roughly an 80% probability to a cut. At the same time, expectations are increasing that the Bank of Japan (BoJ) could postpone additional rate hikes, which further weighs on the Yen relative to the Pound.
Mixed Macro Data from Japan and the UK
On the economic data front, Japan’s Gross Domestic Product (GDP) expanded by 0.3% quarter-on-quarter in Q4, matching forecasts and accelerating from 0.1% in the prior quarter. On an annualized basis, GDP rose to 1.3% from 0.3%, coming in slightly above the 1.2% projection.
In the United Kingdom, BRC Like-for-Like Retail Sales increased 0.7% year-on-year in February. This marked a slowdown from the previous month’s 2.4% gain and fell short of the 2.3% expected, indicating some cooling in consumer spending momentum.
Pound Performance Against Major Currencies
The following table shows the British Pound’s (GBP) percentage change relative to major currencies today. According to the data, the Pound was strongest versus the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.05% | -0.14% | 0.06% | -0.19% | -0.59% | -0.10% | -0.30% | |
| EUR | 0.05% | -0.06% | 0.11% | -0.15% | -0.53% | -0.04% | -0.24% | |
| GBP | 0.14% | 0.06% | 0.13% | -0.10% | -0.47% | 0.02% | -0.16% | |
| JPY | -0.06% | -0.11% | -0.13% | -0.26% | -0.64% | -0.15% | -0.33% | |
| CAD | 0.19% | 0.15% | 0.10% | 0.26% | -0.38% | 0.11% | -0.07% | |
| AUD | 0.59% | 0.53% | 0.47% | 0.64% | 0.38% | 0.48% | 0.29% | |
| NZD | 0.10% | 0.04% | -0.02% | 0.15% | -0.11% | -0.48% | -0.17% | |
| CHF | 0.30% | 0.24% | 0.16% | 0.33% | 0.07% | -0.29% | 0.17% |
The heat map is read by selecting a base currency from the left-hand column and a quote currency from the top row. The intersection displays the percentage move of the base against the quote. For instance, choosing the British Pound on the left and moving across to the US Dollar column gives the performance of GBP (base)/USD (quote).
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