📈 GBP/JPY Climbs Near 2-Week High Despite UK Bank Holiday: What’s Driving the Rally?
On May 26, 2025—despite the muted trading tone due to the UK’s Spring Bank Holiday—the British pound surged against the Japanese yen, briefly approaching the key resistance level of 194.20, marking its highest point in nearly two weeks.
The rally was mainly fueled by news that the U.S. has delayed its planned 50% tariffs on EU imports, originally set to take effect on June 1. The postponement to July 9 boosted investor risk appetite and provided a lift to risk-oriented assets like the pound. The Trump administration’s decision creates more room for negotiations and eases global trade tensions—at least temporarily.
Meanwhile, demand for safe-haven assets like the yen weakened, dragging the currency lower. Investors are awaiting comments from BoJ Governor Kazuo Ueda, scheduled for May 27, hoping to glean hints about future monetary policy changes. Market outlook on the yen remains cautious, especially against the backdrop of rising long-term Japanese bond yields, which point to growing concerns over fiscal strain and potential inflation.
Technically, GBP/JPY is consolidating around 194.00, just shy of the mid-May peak at 194.20. A breakout above this level could open the door to 196.25 or even last December’s high at 198.94. On the downside, the first support lies at 192.00, with a further level at 190.35 if selling picks up.
Momentum indicators like the Relative Strength Index (RSI) still favor bulls, and short- to medium-term moving averages remain firmly aligned—a sign that the current uptrend has structural strength. Still, rising JGB yields could eventually lend support back to the yen, potentially altering the risk-reward balance.
Looking ahead, several key data points and central bank updates could shape market sentiment. Tokyo’s CPI release will be closely watched as a proxy for nationwide inflation and may shift expectations around a possible rate hike from the BoJ later this year. Over in the UK, remarks from BoE Governor Andrew Bailey will be scrutinized, especially after April inflation climbed back to 3.5%, reigniting concerns about stagflation. A more hawkish stance could offer further support to the pound.
Later this week, the Federal Reserve will release minutes from its May meeting. Investors are hoping for clues on the inflation trajectory and the timing of potential rate cuts. Current market consensus expects at most one rate cut this year—a sharp contrast to the more uncertain paths projected for the BoE and BoJ, creating opportunities for volatility and arbitrage.
In summary, GBP/JPY remains caught between shifting global risk sentiment and diverging policy directions from the world’s major central banks. While short-term momentum favors the pound, upcoming trade talks and macroeconomic signals—particularly the July 9 tariff deadline—will play a crucial role in shaping the next leg of the trend. Don’t count the yen out yet, especially if Japan’s monetary stance starts to shift.
(Disclaimer: This content is for informational purposes only and does not constitute investment advice. Foreign exchange markets involve significant risks—please conduct proper risk assessments before trading.)
