GBP/JPY fell for a second day on Wednesday, trading near 213.08 after an intraday high around 213.70 and down about 0.15%. The move followed broad pressure on the Pound amid rising political uncertainty in the UK.
Reports said more than 80 Labour MPs had called for Prime Minister Keir Starmer to resign, and four cabinet ministers had stepped down after Labour losses in last week’s local elections. Wes Streeting was named as a possible challenger, while Starmer said he would not resign.
Market Drivers And Macro Backdrop
The drop was limited as the Yen struggled to strengthen amid Middle East tensions and higher Oil prices, which weigh on Japan due to energy imports. Markets are pricing in two more Bank of England rate rises by year-end, while the Bank of Japan is expected to tighten gradually.
On charts, GBP/JPY was below the 20-day simple moving average near 214.30, with the upper Bollinger Band near 216.66 and the lower band around 211.94. RSI moved towards the mid-40s and ADX sat around the mid-20s; resistance was near 214.29 and support near 211.94.
The Pound began in 886 AD and accounts for 12% of FX, or about $630 billion a day in 2022. Key pairs include GBP/USD 11%, GBP/JPY 3%, and EUR/GBP 2%.
The political instability surrounding the UK Prime Minister is creating a clear short-term headwind for the Pound. We should anticipate continued choppiness and potential weakness in GBP/JPY as long as this leadership uncertainty persists in the headlines. This situation presents a near-term risk that could push the currency pair lower before the longer-term trend reasserts itself.
This political pressure comes as we’ve seen the latest UK inflation figures for April 2026 come in at 3.1%, still significantly above the Bank of England’s 2% target. This persistent inflation reinforces our view that the market is correct to price in at least two more interest rate hikes by the end of the year. The fundamental case for a stronger Pound, driven by monetary policy, is therefore building beneath the surface of the political noise.
Options Positioning And Trade Ideas
On the other side of the pair, the Japanese Yen’s weakness is being compounded by stubbornly high energy prices, with Brent crude oil remaining above $95 a barrel. We saw a similar dynamic through much of 2025, where Japan’s status as a major energy importer weighed heavily on its currency during periods of high oil prices. This has recently been confirmed by Japan’s widening trade deficit, limiting the Bank of Japan’s capacity for aggressive policy tightening.
This creates a conflict between the bearish short-term political news and the bullish medium-term interest rate outlook. For the coming weeks, traders could consider buying put options with expirations in June to protect against or profit from a slide towards the 211.94 support level. This provides a defined-risk way to trade the current negative sentiment driven by UK politics.
Simultaneously, the compelling story remains the widening interest rate differential between the UK and Japan. To position for the eventual turn, we believe purchasing longer-dated call options, with expirations in the fourth quarter of 2026, makes sense. This strategy allows us to look past the immediate political drama and capitalize on the fundamental strength we expect to return to the Pound later this year.
