GBP/JPY Weakens Below 198.00 as Safe-Haven Yen Gains Traction on Risk Aversion

The GBP/JPY pair extends its decline on Tuesday, slipping below the 198.00 handle amid renewed demand for the Japanese Yen (JPY) as a safe-haven asset. The cross has been on the back foot since pulling back from last week’s high near 199.20, pressured by a combination of dovish UK rate expectations and cautious sentiment ahead of major central bank events.

BoE Rate Cut Bets Weigh on Pound Sterling

The British Pound remains under pressure following recent soft labor market data, which has strengthened speculation that the Bank of England (BoE) could begin cutting interest rates as early as August. This dovish shift in monetary policy expectations continues to drag on GBP across the board, adding downside pressure to the GBP/JPY cross.

Yen Benefits from Cautious Market Mood

Meanwhile, the Japanese Yen finds support as investors turn risk-averse ahead of the Bank of Japan’s (BoJ) upcoming policy decision on Thursday. Although recent trade agreements with the US have eased some concerns about Japan’s economic outlook, uncertainty remains due to slowing inflation and political instability, which could complicate the BoJ’s path toward policy normalization.

All Eyes on BoJ Rate Guidance

Market participants are closely watching for clues from the BoJ about potential rate hikes. If the central bank signals readiness to tighten policy further, the JPY could extend its rally, pushing GBP/JPY even lower in the coming sessions.

Outlook Remains Bearish for GBP/JPY

In the near term, the technical and fundamental landscape favors further downside for GBP/JPY. While risk-on sentiment could temporarily limit JPY gains, any recovery in the pair is likely to face selling pressure as long as BoE rate cut expectations persist and safe-haven demand for the Yen holds firm.

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