The GBP/JPY pair is struggling to stay above the 211.00 level due to increased demand for the Japanese Yen (JPY), which is seen as a safe haven. This comes amid worries over when the next Bank of Japan (BoJ) rate hike will occur and rising geopolitical tensions, including U.S. military actions in Latin America and the ongoing Russia-Ukraine conflict. Although there was a slight rise during the Asian session, the GBP/JPY pair is having difficulty gaining traction and remains close to its daily lows. However, selling pressure is low, indicating that traders are hesitant to bet on further declines after recent highs earlier this week.

Geopolitical Instabilities And The Yen

Geopolitical issues continue to bolster the JPY as a safe choice in uncertain times. Economic indicators, like Japan’s real wage figures, add to the cautious trading atmosphere. Despite a significant drop in wages, potential policy changes by the BoJ help support the Yen, which could create challenges for the currency pair. On the other hand, the Bank of England is maintaining a relatively strong stance, which could support the British Pound (GBP). As no major UK economic reports are expected shortly, the market is primarily watching JPY movements. Today, the Yen is the strongest currency when compared to the Australian Dollar. The heatmap shows currency changes, confirming the Yen’s strength. As we begin 2026, the GBP/JPY remains below 211.00, caught between opposing forces. Looking back to late 2025, geopolitical tensions involving the US in Latin America and the Arctic are benefiting the safe-haven Yen. This makes it tough for those hoping for a simple continuation of the uptrend. Speculation about another BoJ rate hike is a major influence, a topic that surfaced when they ended negative interest rates in March 2024. However, a November 2025 report showing that Japanese real wages fell sharply complicates the timing of future moves. This uncertainty likely explains why Yen bulls are hesitant to push the pair significantly lower.

British Pound And Bank Of England Influence

Conversely, the British Pound is supported by a firm Bank of England. UK core inflation data for the last quarter of 2025 remains stubbornly above 3%, meaning the BoE is in no hurry to cut rates. This keeps the interest rate gap between the UK and Japan wide, providing support for the GBP/JPY for now. Given this stalemate, we believe that trading the expected volatility, rather than the direction, will be most effective in the coming weeks. The current uncertainty makes buying options, such as a straddle, an appealing strategy to profit from significant price shifts in either direction. The one-month implied volatility for GBP/JPY has already risen above 10%, reflecting the market’s tension. For those who think the recent rally has peaked, the 212.15 high from last year now represents a strong resistance level. A good strategy might involve selling out-of-the-money call options or using a bear call spread to profit from the expectation that the pair’s upside is limited. This would generate income while managing risk if the pair unexpectedly moves higher. Create your live VT Markets account and start trading now.

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