GBP/JPY treads water above 195.50, maintains position near five-month highs

• GBP/JPY hovers near a five-month high of 196.45, reached on Tuesday.
• A Reuters poll suggested that the BoJ will not increase interest rates in 2025 amid uncertainty over US tariff policy.
• The safe-haven JPY struggles due to easing US-China tariff tensions.

GBP/JPY remains subdued for the third consecutive day, trading around 195.60 during the early European hours on Wednesday. However, the currency cross maintains its position near a five-month high of 196.45, which was recorded on Tuesday, with hopes of further gains. The Japanese Yen (JPY) faces challenges following a Reuters poll, suggesting that the Bank of Japan (BoJ) will not raise another interest rate again this year due to uncertainty over US tariff policy.

Out of 60 economists who participated in the Reuters survey conducted between June 2-10, no one expected the BoJ to increase rates at its upcoming policy meeting due on June 16-17. While 30 out of 58 respondents expected borrowing costs to remain at 0.50% in 2025, a reversal from the May poll, when the same fraction expected rates at 0.75% by end-2025.

Additionally, the JPY may face challenges due to dampened safe-haven demand amid the cooling off of tariff tensions between the US and China. Traders await further developments in the US-China agreement as officials seek approval from their leaders before moving ahead with the implementation of the Geneva Consensus. US Commerce Secretary Howard Lutnick suggested that potential resolutions with China have been achieved. Meanwhile, China's Vice Commerce Minister Li Chenggang noted that communication with the United States has been rational and candid.

Market sentiment improved following the reports suggesting that Washington is considering easing semiconductor restrictions and looking for accelerated rare-earth shipments. This boosted the hope of reduced supply-chain friction, supporting global trade sentiment.