The yen staged a strong rebound, causing the pound/yen exchange rate to weaken significantly.
2025-12-15 17:03:52
The British pound/Japanese yen (GBP/JPY) weakened significantly during Monday's European trading session, falling by about 0.5% to around 207.30. This decline was mainly due to a broad-based strengthening of the yen, with the core factor driving the yen's rebound being Japan's latest fourth-quarter Tankan business climate survey data.
Data shows that Japan's large-scale manufacturing confidence index rose to 15, the highest level in nearly four years, up from 14 previously. The continued improvement in manufacturing confidence, coupled with inflation remaining above the central bank's target, has further strengthened market expectations that the Bank of Japan (BoJ) will raise interest rates at its policy meeting this Friday.
The market widely expects the Bank of Japan (BoJ) to raise its policy rate by 25 basis points to 0.75%. Bank of Japan Governor Kazuo Ueda recently stated that the central bank is gradually approaching its inflation target, which is seen as an important signal of policy normalization.
The pound sterling performed relatively flat against the backdrop of a stronger yen. Investors are awaiting upcoming UK employment data. The market expects the UK unemployment rate to rise to 5.1%, while average wage growth excluding bonuses may slow to 4.5%.
If employment data confirms a cooling labor market, it will further strengthen market expectations that the Bank of England (BoE) will cut interest rates by 25 basis points to 3.75% this Thursday. Overall, the difference in policy expectations between the BoJ (BoE) and BoE (BoJ) being hawkish and dovish is the core logic behind the current pressure on GBP/JPY.
Ahead of the policy meeting results, market sentiment is leaning more towards the yen, and GBP/JPY still faces downward pressure in the short term.
From the daily chart, the exchange rate has fallen from its high and entered a short-term adjustment phase, with momentum clearly weakening. Short-term moving averages have turned downwards, and the price has broken through some short-term support, indicating that the bears are in control. The support level to watch is the psychological level of 207.00, with further support around 205.80.
The upside resistance levels to watch are 208.50 and 210.00. The RSI has retreated from its highs but hasn't yet entered oversold territory, suggesting that downside potential hasn't been fully realized. The MACD shows initial signs of a bearish crossover at high levels, indicating increasing bearish momentum. Technically, GBP/JPY is bearish in the short term; a break below 207.00 could open up further downside potential.
Editor's Note:
With expectations of a Bank of Japan rate hike continuing to rise and a Bank of England rate cut almost a certainty, the policy logic for GBP/JPY is clearly bearish. In the short term, if the BoJ raises rates as expected and the BoE releases a more dovish signal, GBP/JPY could potentially fall further to the 206 or even 205 area.
We need to pay close attention to the volatility risks brought about by the outcomes of the two central bank meetings this week and the UK employment data.
Data shows that Japan's large-scale manufacturing confidence index rose to 15, the highest level in nearly four years, up from 14 previously. The continued improvement in manufacturing confidence, coupled with inflation remaining above the central bank's target, has further strengthened market expectations that the Bank of Japan (BoJ) will raise interest rates at its policy meeting this Friday.
The market widely expects the Bank of Japan (BoJ) to raise its policy rate by 25 basis points to 0.75%. Bank of Japan Governor Kazuo Ueda recently stated that the central bank is gradually approaching its inflation target, which is seen as an important signal of policy normalization.
The pound sterling performed relatively flat against the backdrop of a stronger yen. Investors are awaiting upcoming UK employment data. The market expects the UK unemployment rate to rise to 5.1%, while average wage growth excluding bonuses may slow to 4.5%.
If employment data confirms a cooling labor market, it will further strengthen market expectations that the Bank of England (BoE) will cut interest rates by 25 basis points to 3.75% this Thursday. Overall, the difference in policy expectations between the BoJ (BoE) and BoE (BoJ) being hawkish and dovish is the core logic behind the current pressure on GBP/JPY.
Ahead of the policy meeting results, market sentiment is leaning more towards the yen, and GBP/JPY still faces downward pressure in the short term.
From the daily chart, the exchange rate has fallen from its high and entered a short-term adjustment phase, with momentum clearly weakening. Short-term moving averages have turned downwards, and the price has broken through some short-term support, indicating that the bears are in control. The support level to watch is the psychological level of 207.00, with further support around 205.80.
The upside resistance levels to watch are 208.50 and 210.00. The RSI has retreated from its highs but hasn't yet entered oversold territory, suggesting that downside potential hasn't been fully realized. The MACD shows initial signs of a bearish crossover at high levels, indicating increasing bearish momentum. Technically, GBP/JPY is bearish in the short term; a break below 207.00 could open up further downside potential.
Editor's Note:
With expectations of a Bank of Japan rate hike continuing to rise and a Bank of England rate cut almost a certainty, the policy logic for GBP/JPY is clearly bearish. In the short term, if the BoJ raises rates as expected and the BoE releases a more dovish signal, GBP/JPY could potentially fall further to the 206 or even 205 area.
We need to pay close attention to the volatility risks brought about by the outcomes of the two central bank meetings this week and the UK employment data.
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