Pound Powers Up: Can GBP/JPY Break Through Amid Tariff Tensions?

The British Pound is gaining ground against the Japanese Yen, with GBP/JPY hovering near 199.30 on Tuesday, buoyed by diverging central bank policies and Yen weakness. As markets brace for UK inflation data and looming US-Japan trade talks, the pair faces a critical test—can it push past key levels or falter under tariff pressure?

Inflation Focus Fuels Pound Strength

Attention turns to Wednesday’s UK Consumer Price Index (CPI) release, with the central bank eyeing signs of tariff-driven inflation. With interest rates steady at 4.25%, the UK’s tighter policy contrasts sharply with the ultra-dovish 0.5% stance elsewhere, widening the rate differential and propping up the Pound. Geopolitical tensions and trade uncertainties add to the bullish momentum, keeping GBP/JPY in focus as investors assess economic resilience.

Yen Weakness Deepens Amid Trade Talks

The Yen faces headwinds as trade friction looms, with a Friday meeting between Japanese and US officials aiming to salvage talks before an August tariff deadline. The UK already grapples with a 10% US tariff on exports, while threats of a 25% hike on Japanese imports—on top of 50% duties on steel and aluminum and 25% on auto parts—hit Japan’s export-driven economy hard. This keeps policy dovish, weakening the Yen and supporting GBP/JPY’s climb.

Technical Trends Point Upward

GBP/JPY nears the upper edge of its ascending channel at 199.80, just above the June high of 198.81, signaling strong bullish interest. The channel, active since April, continues to guide price action, with the psychological 200 level in sight. A break could confirm the uptrend, but resistance may cap gains if trade talks falter.

What’s Next for GBP/JPY?

The pair’s fate hinges on CPI data and trade outcomes. A hawkish inflation signal could push GBP/JPY past 200, while tariff escalation might weigh on the Yen further. Markets face a tightrope—will bullish momentum hold, or will uncertainty derail the rally?