GBP Falls Amid Yen Strength and Hawkish BoJ Expectations

The British Pound (GBP) has fallen nearly 1% against the Japanese Yen (JPY), its lowest level since August 10, amid speculation of a possible intervention by Japanese authorities.

The sharp rise in the JPY is also attributed to hawkish expectations from the Bank of Japan (BoJ), with Governor Kazuo Ueda indicating that policymakers will discuss another rate increase at their September 17-18 meeting due to growing inflation risks. BoJ board member Hajime Takata added that the central bank needs a more nimble approach with rate hikes.

However, UK fiscal concerns and the Bank of England's (BoE) steady policy outlook are keeping sentiment towards the Pound Sterling subdued. The BoE is expected to leave interest rates unchanged at 3.75% later this month, according to Governor Andrew Bailey, who stated last week that the second-round effects of higher energy prices were subdued.

The forthcoming UK budget scheduled for late October will be a critical test of the improved backdrop, with strategists at Scotiabank emphasizing that sentiment remains a key source of support for the GBP. The technical analysis suggests that former upside levels are now capping the recovery in GBP/JPY, with price trading below the 100-day and 50-day simple moving averages.