The GBP/JPY currency pair extended losses on Wednesday, as ongoing political uncertainty in the United Kingdom continued to weigh on the British Pound.
The UK has entered a new phase of political turmoil after Prime Minister Keir Starmer resigned on Monday. His departure followed intense pressure sparked by Andy Burnham’s victory in the Makerfield by-election last week. With Starmer stepping down, the Labour Party now faces the task of choosing a new leader to head the government.
Beyond politics, weaker UK macroeconomic data is also dragging on the Pound.
UK private sector activity contracted for a second consecutive month in June. The flash Composite PMI declined to 49.4 from 49.7 in May, marking a 14-month low and remaining below the 50 threshold that signals expansion.
And, UK Manufacturing PMI slipped to a three-month low of 53.1 in June from 53.9 in May.
At the same time, rising expectations of BoJ policy normalization and the threat of direct intervention by Japanese authorities have lent support to the Japanese Yen.
On Monday, Finance Minister Satsuki Katayama said that officials were prepared to respond appropriately to currency fluctuations at any time. Those remarks were reinforced on Tuesday when Chief Cabinet Secretary Minoru Kihara reiterated that the government would take decisive action against volatile foreign exchange moves if necessary.
This kept market participants alert to the possibility of official Yen-buying operations.
The Bank of Japan’s Summary of Opinions from its June meeting showed that most board members favored raising the policy rate. They highlighted that inflation risks were rising and that the underlying CPI was steadily moving toward the 2% objective.
The GBP/JPY currency pair was last down 0.20% on the day to trade at 212.77.
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