GBP/JPY Cross Hits Two-Week High Amid Japan's Fiscal Woes

The British Pound has continued its upward trend against the Japanese Yen, reaching a nearly two-week high of around 215.35-215.40.

This comes as the Yen struggles with structural headwinds, including Prime Minister Sanae Takaichi's aggressive economic stimulus and tax cuts, which are adding to Japan's worsening fiscal conditions.

The BoJ interest rate hike to its highest level since 1995 has not been enough to offset the low borrowing costs in Japan compared to other major economies, keeping the carry trade active and undermining the JPY.

Investors remain worried about the impact of energy disruptions due to the Iran war on the Japanese economy, making another BoJ rate hike move in September a possibility.

Despite this, traders are cautious not to place aggressive bullish bets on the British Pound, waiting for the upcoming UK macro data dump, including the preliminary Q2 GDP report on Thursday.