GBP/JPY nears YTD highs above 198.00 amid a moderate risk appetite

The Pound resumed its positive trend as the safe-haven Yen struggles in risk-on markets
A divided BoJ committee puts further rate hikes into question and adds bearish pressure on the Yen,
GBP/JPY has rallied 1.6% over the last five days, nearing the YTD highs at 198.20 and 198.25.

The Pound has reversed Tuesday's pullback and resumed its broader bullish trend on Wednesday, fuelled by the ongoing risk appetite. The Yen is trading lower across the board in the aftermath of the ceasefire in the Middle East, with the Bank of Japan divided about further monetary tightening

A fragile peace between Iran and Israel holds for the second day, which keeps investors' mood positive. The US intelligence, however, reported that the attacks might have only delayed Tehran's nuclear program by months, which casts doubts about a durable peace

A divided BoJ puts further rate hikes into question

In Japan, macroeconomic data have beaten expectations, with the Leading Economic Index improving against expectations. On the other hand, however, the divergence within BoJ officials regarding the ban's monetary policy is acting as a headwind for the JPY.

The Summary of Opinions from the Bank of Japan's last week's meeting revealed that the committee is divided about its tightening cycle. Part of the board is in favour of keeping rates on hold until the inflationary impact of Trump's tariffs clarifies, with one member calling for decisive rate hikes even in the uncertain economic context.

This divergence puts the bank's monetary policy normalisation cycle into question, adding pressure on the Yen, already weighed by investors' appetite for risk. The pair has rallied about 1.6% in the last five trading days and is approaching year-to-date highs, at 198.20 and 198.25.

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