The pound sterling came under pressure and fell, with GBP/JPY dropping to 208.60, as cooling inflation in the UK and Japan limited the range of fluctuations.
2026-02-20 14:49:43
GBP/JPY continued to decline during Friday's Asian session, consolidating around 208.60. The pound remained weak overall, with market focus on the UK retail sales and S&P Global PMI data to be released later.
Recent employment data released by the UK shows that the unemployment rate rose to 5.2% in the three months to December, with wage growth slowing, indicating a cooling labor market.
Meanwhile, UK inflation fell to a near one-year low, reinforcing market bets on a rate cut at the Bank of England's March meeting.
Catherine Mann, a member of the Bank of England's Monetary Policy Committee (MPC), said the January CPI data was encouraging, noting that while core inflation remained slightly above ideal levels, the overall price trend was improving.
On the other hand, the depreciation of the yen limited the downside potential of the GBP/JPY exchange rate. Japan's national CPI rose 1.5% year-on-year in January, lower than the previous 2.1%; the core CPI, excluding fresh food, was 2.0%, lower than the previous 2.4%.
The core CPI, excluding food and energy, was 2.6%, also slowing from the previous reading of 2.9%. This cooling inflation may weaken expectations of further policy tightening by the Bank of Japan in the short term, thus limiting the yen's upside potential.
Overall, the weak fundamentals of the British pound dominated short-term trends, but the lack of strong momentum in the Japanese yen resulted in a mild pullback rather than a one-sided decline in GBP/JPY.
The daily chart shows that GBP/JPY has fallen below the 210.00 level after retreating from its highs, entering a short-term correction phase. The current price is trading below the 20-day moving average, indicating weak momentum.
The MACD formed a death cross and fell back from above the zero line, suggesting that the upward momentum was weakening; the RSI fell back to around 50, indicating that the forces of bulls and bears were approaching equilibrium but were biased towards the bears.
The 4-hour chart shows that the exchange rate is fluctuating within the range of 208.00–210.50. The short-term support levels to watch are the 207.80 and 206.50 areas; if these levels are broken, the psychological level of 205.00 may be tested.
Resistance levels are at 209.80 and 210.50. Only a sustained move above 210.50 would suggest a potential resumption of the short-term rebound. The overall technical structure indicates a weak, volatile short-term trend, with no clear breakout yet.
Editor's Note:
The GBP/JPY exchange rate is currently driven by weakening pound fundamentals, but declining Japanese inflation is also reducing the yen's upward momentum, resulting in a relatively moderate decline. If UK retail sales and PMI data are weak, the pound may face further downward pressure.
Conversely, if the data is better than expected, the exchange rate may rebound in the short term. In the short term, range-bound trading is more likely, and attention should be paid to the volatility risk brought about by changes in macroeconomic data.
Recent employment data released by the UK shows that the unemployment rate rose to 5.2% in the three months to December, with wage growth slowing, indicating a cooling labor market.
Meanwhile, UK inflation fell to a near one-year low, reinforcing market bets on a rate cut at the Bank of England's March meeting.
Catherine Mann, a member of the Bank of England's Monetary Policy Committee (MPC), said the January CPI data was encouraging, noting that while core inflation remained slightly above ideal levels, the overall price trend was improving.
On the other hand, the depreciation of the yen limited the downside potential of the GBP/JPY exchange rate. Japan's national CPI rose 1.5% year-on-year in January, lower than the previous 2.1%; the core CPI, excluding fresh food, was 2.0%, lower than the previous 2.4%.
The core CPI, excluding food and energy, was 2.6%, also slowing from the previous reading of 2.9%. This cooling inflation may weaken expectations of further policy tightening by the Bank of Japan in the short term, thus limiting the yen's upside potential.
Overall, the weak fundamentals of the British pound dominated short-term trends, but the lack of strong momentum in the Japanese yen resulted in a mild pullback rather than a one-sided decline in GBP/JPY.
The daily chart shows that GBP/JPY has fallen below the 210.00 level after retreating from its highs, entering a short-term correction phase. The current price is trading below the 20-day moving average, indicating weak momentum.
The MACD formed a death cross and fell back from above the zero line, suggesting that the upward momentum was weakening; the RSI fell back to around 50, indicating that the forces of bulls and bears were approaching equilibrium but were biased towards the bears.
The 4-hour chart shows that the exchange rate is fluctuating within the range of 208.00–210.50. The short-term support levels to watch are the 207.80 and 206.50 areas; if these levels are broken, the psychological level of 205.00 may be tested.
Resistance levels are at 209.80 and 210.50. Only a sustained move above 210.50 would suggest a potential resumption of the short-term rebound. The overall technical structure indicates a weak, volatile short-term trend, with no clear breakout yet.
Editor's Note:
The GBP/JPY exchange rate is currently driven by weakening pound fundamentals, but declining Japanese inflation is also reducing the yen's upward momentum, resulting in a relatively moderate decline. If UK retail sales and PMI data are weak, the pound may face further downward pressure.
Conversely, if the data is better than expected, the exchange rate may rebound in the short term. In the short term, range-bound trading is more likely, and attention should be paid to the volatility risk brought about by changes in macroeconomic data.
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- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
