GBP/JPY extends its winning streak for the fourth consecutive session, reaching 205. 52, the highest since July 2024, during the Asian hours on Thursday. The currency cross gains ground as the Japanese Yen (JPY) declines on the potential for Japan’s Prime Minister Sanae Takaichi to unveil a stimulus package exceeding JPY 20 trillion. Members of the ruling Liberal Democratic Party (LDP) also proposed a supplementary budget exceeding JPY 25 trillion to support the plan, well above last year’s JPY 13. 9 trillion extra budget. The massive spending plan raised market caution amid concerns about Japan’s fiscal health. However, the upside of the GBP/JPY cross could be restrained as the JPY may receive support on the Reuters poll, indicating the Bank of Japan (BoJ) appears poised to raise interest rates to 0. 75% from 0. 50% at its December 18-19 meeting. Forecasts remain closely balanced, 53% of respondents anticipate a December hike, and all economists who offered a longer-term view expect rates to reach at least 0. 75% by the end of Q1 2026. BoJ board member Junko Koeda said in a speech Thursday that supply-demand indicators show the output gap near 0% and that labour markets remain tight amid a growing labour shortage. Koeda stated that “in this situation, I believe the bank must continue to raise the policy interest rate and adjust the degree of monetary accommodation in accordance with improvement in economic activity and prices.” She emphasized that ongoing economic and price trends warrant further policy adjustment. Additionally, the GBP/JPY cross may edge lower as the Pound Sterling (GBP) could face challenges amid signs of cooling price pressures, which have strengthened expectations for a Bank of England (BoE) rate cut in December. After the UK CPI release, traders raised the probability of a December BoE cut to 85% from 80% before the data.
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GBP/JPY reaches fresh 16-month highs above 205.50
