GBP/JPY remains under pressure around 196.00 amid rallying UK bond yields

• GBP/JPY sees vulnerable as a significant increase in UK bond yields has weighed on the Pound Sterling.
• UK bond yields rallied after Chancellor Reeves presented new welfare bill.
• BoE Taylor sees five interest rate cuts this year.

The GBP/JPY pair trades cautiously near 196.00 during the Asian session on Thursday after posting a fresh weekly low around 195.40 the previous day. The cross faces a sharp selling pressure as the Pound Sterling (GBP) underperforms across the board due to a sharp increase United Kingdom (UK) bond yield, following speculation over the future of Rachel Reeves as Chancellor of the Exchequer.

10-year UK gilt yields soar almost 4% to near 4.61% on Wednesday after Chancellor Reeves presented new welfare scheme at the House of Commons on Tuesday.

Conservative members opposed Rachel's welfare bill as it was in contradiction to her fiscal rules, which she committed to bring down ballooning UK fiscal deficit.

The speculation of Rachel's resignation stemmed after UK Prime Minister Keir Starmer avoided Conservative leader Kemi Badenoch when she questioned about Rachel's survival. However, Starmer has backed Rachel later as a spokesperson from the Downing Street said on his behalf that "She is going nowhere".

Meanwhile, the endorsement of higher interest rate cuts by Bank of England (BoE) Monetary Policy Committee (MPC) member Alan Taylor at the European Central Bank (ECB) summit has also weighed on the Pound Sterling. Taylor anticipated five interest rate cuts and seen the neutral nominal rate at around 2.75 to 3 percent by the year end.