GBP/JPY softens to near 195.00 ahead of BoE rate decision

• GBP/JPY weakens to around 195.05 in Wednesday's early European session.
• The cautious sentiment supports the Japanese Yen, but reduced bets for a BoJ rate hike might cap its upside. 
• The BoE is widely expected to keep interest rates on hold at 4.25% on Thursday. 

The GBP/JPY cross trades in negative territory near 195.05 during the early European trading hours on Wednesday. The cautious mood in the market provides some support to the Japanese Yen (JPY), a safe-haven currency. Investors will closely monitor the Bank of England (BoE) interest rate decision on Thursday. 

Investors assess the Israel-Iran conflict after US President Donald Trump urged "everyone" to immediately evacuate Tehran. Trump said that he wants a permanent end to Iran's route to nuclear weapons. Additionally, Trump posted on his social media platform late Tuesday, calling for Iran's "unconditional surrender." The renewed Middle East geopolitical tensions boost the safe-haven flows, benefiting the JPY against the Pound Sterling. 

Inflation in the UK eased to 3.4% YoY in May from 3.5% in April, according to the Office for National Statistics on Wednesday. This reading came in line with the market consensus. Meanwhile, the Core CPI, which excludes the volatile prices of food and energy, climbed 3.5% YoY in May versus 3.8% prior, softer than the expectation of 3.6%.

Money markets expect the BoE to hold rates steady at 4.25% at its June meeting on Thursday and see about two more 25 basis points (bps) rate cuts by December. Markets expect the UK central bank will maintain its "gradual and careful" approach to easing policy. Any dovish remarks from the BoE officials could drag the GBP lower in the near term.