The GBP/JPY pair remains under pressure around 196.00 during Thursday’s Asian session, following a decline to a fresh weekly low of 195.40 on Wednesday. The Pound Sterling (GBP) is broadly weaker as rising UK bond yields and political tension surrounding Chancellor Rachel Reeves weigh on sentiment.
UK Bond Yields Spike Following Welfare Bill Announcement
UK 10-year gilt yields surged nearly 4% to 4.61% after Chancellor Reeves introduced a new welfare scheme in Parliament. The bill faced strong opposition from Conservative lawmakers, who argued it contradicts Reeves’ fiscal rules aimed at reducing the UK’s soaring deficit. Political uncertainty intensified when Prime Minister Keir Starmer avoided directly addressing questions about Reeves’ future, though a Downing Street spokesperson later confirmed she has the Prime Minister’s full support.
British Pound Weakness Broad-Based
The table below highlights GBP’s performance against major currencies this week, showing notable underperformance:
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| GBP | -0.61% | -1.07% | — | -1.06% | -1.26% | -1.01% | -0.79% | -1.40% |
The Pound has been the weakest among major currencies, particularly underperforming against the Swiss Franc and Euro.
BoE’s Taylor Hints at Aggressive Rate Cuts
Adding to the bearish pressure on GBP, Bank of England MPC member Alan Taylor suggested at the ECB Forum that the central bank may deliver up to five interest rate cuts this year. He also estimated the neutral nominal interest rate to settle between 2.75% and 3.00% by year-end—far below current levels.
BoJ Maintains Hawkish Flexibility
In contrast, the Japanese Yen (JPY) received a modest boost from hawkish remarks by BoJ board member Hajime Takata. He noted that the central bank could resume tightening policy after carefully evaluating the impact of US-imposed tariffs. Takata emphasized the need for a nimble policy response should US economic or trade conditions shift.
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