Concerns about the UK’s finances have grown due to large tax increases and record-high borrowing plans under the Starmer government. This led to selling of long-term bonds, pushing interest rates to levels not seen since 2008. Meanwhile, last week’s UK CPI was lower than expected, increasing expectations of two rate cuts within the year, which caused GBP/JPY to fall.
If the average weekly wages in the UK employment data released this week show another increase, it could reduce expectations of rate cuts based on the CPI. However, market attention remains focused on fiscal issues, keeping a bearish outlook for the pound.
Additionally, as the Trump administration starts, uncertainty around tariff policies is expected to make yen carry trades more challenging. If the BOJ raises rates this week, narrowing the interest rate gap, GBP/JPY could fall further.
This Week’s GBP/JPY Forecast Range: 193.00–187.30
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