The GBP/JPY currency pair has been showing positive movement for the second day in a row, bouncing back after briefly falling below 202.00. It hit a new daily high, but it didn’t surpass the peak from the previous day as traders awaited important economic data from the UK.

UK GDP Release

The UK is set to release its monthly GDP data, which is crucial for measuring the country’s economic health. A weak GDP following recent poor labor market statistics may lead to predictions that the Bank of England will cut interest rates again. This could put pressure on the British Pound, potentially causing the GBP/JPY pair to decline. Expectations that the Bank of Japan will stick to its current policy and might increase rates by the end of the year are supporting the Japanese Yen. However, uncertainty in domestic politics could disrupt the BoJ’s plans, limiting the Yen’s strength and helping the GBP/JPY pair. It’s important to confirm if the current buying trend continues to determine if the recent drop from the highest level since July 2024 has ended. On the other hand, bearish traders might wait for a significant drop below 201.50 before making new trades for further potential declines. The UK GDP, reported by the Office for National Statistics, is a key indicator of economic activity. An increase could strengthen the Pound, while a decrease could signal weakness and affect market mood. The next GDP release is due on October 16, 2025. On October 16, we noted buying interest in GBP/JPY above the mid-202.00s, despite the release of disappointing UK economic data. The monthly GDP figure was -0.1%, falling short of the expected 0.1% growth, confirming the economy is stagnating. This poor result suggests the Bank of England may cut interest rates even more in the coming months.

Japanese Monetary Policy

This weak GDP announcement comes shortly after the UK unemployment rate rose to 4.5%, its highest in over a year. Given that the Bank of England reduced rates by 25 basis points in August 2025, traders should expect more rate cuts. This shift in policy is generally negative for the British Pound. In contrast, the Bank of Japan has been on a different track, having ended its negative interest rate policy in 2024. Markets are now predicting a greater than 60% chance of another rate hike by the end of this year, which would support the Yen. This divergence between the Bank of England’s easing and the Bank of Japan’s tightening is likely to weigh down the GBP/JPY cross. For derivative traders, this situation presents an opportunity to bet on a decline in the pair. Buying put options with strike prices below 202.00 may be a smart move to capture bearish potential while managing risk. The ongoing uncertainty in Japanese politics could mean that implied volatility might offer good opportunities for these strategies. However, confirmation is essential. We should watch for a sustained drop below the 201.50 support level. If it falls below this point, it would indicate that the earlier rally has ended and a deeper decline is likely. Until then, the currency pair may remain unstable due to political risks that could briefly weaken the Yen. Create your live VT Markets account and start trading now.

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