GBP/JPY attracts some sellers below 193.50 despite Japan's downbeat GDP data

• GBP/JPY weakens to around 193.40, down 0.20% on the day. 
• Japan's economy shrank more than expected in Q1. 
• Rising bets that the BoE may keep interest rates higher for longer could limit the GBP's losses. 

The GBP/JPY cross extends its downside to near 193.40 during the early European trading hours on Friday. The Japanese Yen (JPY) strengthens against the Pound Sterling (GBP) despite Japan's disappointing GDP report. 

Japan's economy shrank for the first time in a year and at a faster pace than expected. Japan's Gross Domestic Product (GDP) contracted by 0.2% QoQ in the first quarter (Q1) of 2025, following a growth of 0.6% in Q4 of 2024, the preliminary reading released by Japan's Cabinet Office showed on Friday. Markets expected a 0.1% decline. Meanwhile, the country's GDP fell 0.7% YoY in Q1 versus 2.2% prior, below the market consensus of -0.2%. However, the downbeat GDP data has little to no impact on the JPY. 

The Bank of Japan (BoJ) maintained its view that rising wages and prices would support a continued path toward policy normalization, supporting the JPY and creating a headwind for the cross. The Bank of Japan's April 30-May 1 Summary of Opinions, released earlier this week, suggested that policymakers maintain the view on hiking interest rates further. 

On the other hand, the expectation that the Bank of England (BoE) may need to keep higher interest rates for longer than markets are currently pricing in might help limit the GBP's losses in the near term. Markets have priced in a cut in interest rates of up to 48.6 basis points (bps) in total by the end of the year, with no change in policy at the next BoE meeting in June, according to Reuters.