GBP/JPY drops to two-week low below 196.00 on UK political jitters

• GBP/JPY stays under strong selling pressure and trades below 196.00 on Wednesday.
• UK gilt selloff weighs on Pound Sterling.
• UK Prime Minister Keir Starmer refused to confirm that finance minister Rachel Reeves will remain in her position.

Pound Sterling stays under heavy selling pressure on Wednesday as markets assess the latest political developments in the UK. At the time of press, GBP/JPY was trading at its lowest level in two weeks near 195.50, losing 0.8% on a daily basis.

British finance minister Rachel Reeves seemed visibly upset during PMQs on Wednesday after Prime Minister Keir Starmer refused to guarantee that she would remain in her position until the next election. This development triggered a selloff in UK government bonds, with the yield on the 10-year reference rising more than 4% on the day to its highest level since June.

Although Starmer's press secretary later said that Reeves has the full support of the Prime Minister, markets largely ignored this comment. "The chancellor is going nowhere, she has the prime minister's full backing," press secretary told reporters.

Reflecting the broad-based GBP weakness, EUR/GBP was last seen rising nearly 1% on the day above 0.8650, while GBP/USD was down more than 1% near 1.3600.