GBP/JPY retreats as safe-haven demand rises ahead of Trump's tariff deadline

• GBP/JPY edges lower as safe-haven demand rises ahead of President Trump's July 9 tariff deadline.
• UK Prime Minister Keir Starmer faces political pressure from the Labour Party, limiting upside potential for Sterling.
• GBP/JPY retreats as technical resistance firms around 198.00

The Japanese Yen (JPY) is strengthening against the British Pound (GBP) on Friday as markets turn cautious ahead of the weekend.

With GBP/JPY retreating after failing to gain traction above the psychologically significant 198.00 level on Thursday, Friday's price action has been driven by an increase in the demand for safe havens ahead of US President Donald Trump's tariff deadline on July 9.

At the time of writing, GBP/JPY is trading below the 10-day Simple Moving Average (SMA), providing near-term resistance at 197.61. Immediate support is found at the 197.00 psychological round number, a break of which could trigger a deeper correction toward the 23.6% Fibonacci retracement level of the April-July uptrend at 195.41.

GBP/JPY remains vulnerable to the broader macro-fundamental backdrop

UK Prime Minister Keir Starmer is under increasing scrutiny after recent compromises on welfare and growing disagreements within the Labour Party over budget strategy and proposed spending cuts.

These internal challenges, coupled with concerns about ballooning deficits and the lack of a well-defined tax plan, have been hindering momentum in the GBP/JPY exchange rate.

Meanwhile, in Japan, the Yen remains under pressure due to the Bank of Japan's (BoJ) ongoing commitment to an ultra-loose monetary policy. This approach stands in contrast to the tightening measures seen in other major economies.

Furthermore, renewed trade tensions with the United States resulting from Japan's reluctance to import rice from the US have triggered a trade war between the two nations. With concerns about potential tariff hikes and export restrictions related to technology and automobiles ahead of the July 9 tariff deadline, capping Yen's gains.

GBP/JPY retreats as technical resistance firms around 198.00

On the daily chart below, GBP/JPY remains in a generally bullish structure. Price action currently remains above its 200-day SMA, offering longer-term support at 193.55.

However, a clear break of the 198.00 handle is required before the pair can confidently continue along its upward trajectory. The ability to do so would then bring the recent June swing high back into play at 198.81.

GBP/JPY daily chart

Meanwhile, the Relative Strength Index (RSI) sits near 55, indicating neutral momentum with a slight bullish tilt.

If the pair manages to clear resistance around 198.00-198.81, it could resume its uptrend, while a drop below 195.41 might expose deeper Fibonacci supports, particularly near 193.30 and the 200-day MA.