GBP/JPY has corrected from a 16-year high of 204.75 reached on Monday, trading around 204.00 during the early European session on Tuesday. This decrease can be attributed to the softer data released by the British Retail Consortium (BRC) indicating a 0.2% year-over-year increase in the BRC Shop Price Index (SPI) for June, lower than the previous 0.6% rise.
The Bank of England’s dovish stance in June has raised expectations for a rate cut at the upcoming August monetary policy meeting, which may weaken the British Pound (GBP) and impact the GBP/JPY cross. Additionally, GBP traders are closely monitoring the general election on Thursday, with exit polls suggesting a potential victory for the Opposition Labour Party over the Conservative Party led by UK Prime Minister Rishi Sunak.
On the Japanese Yen front, verbal intervention by Japanese authorities, such as Finance Minister Shunichi Suzuki’s statement on monitoring FX moves, may provide support for the Japanese Yen and cap the upside of the GBP/JPY cross. The Bank of Japan is also anticipated to reduce its monthly bond purchases by around $100 billion (¥16.00 trillion) in the first year under a quantitative tightening plan set to be released this month.