GBP/JPY retreats slightly from its highest level since July 2024, back below 200.00

• GBP/JPY climbs to its highest level since July 2024 amid a broadly weaker JPY.
• Domestic political turmoil offsets BoJ rate hike bets and undermines the JPY.
• Fiscal concerns act as a headwind for the GBP and cap gains for the cross.

The GBP/JPY cross opens with a bullish gap at the start of a new trading week and touches a fresh high since July 2024, around the 200.35 region during the Asian session. Spot prices, however, retreat a few pips from the daily peak and currently trade near the 200.00 psychological mark, still up over 0.40% for the day.

The Japanese Yen (JPY) weakens across the board in reaction to news over the weekend that Japan's Prime Minister Shigeru Ishiba will step down, and provides a goodish lift to the GBP/JPY cross. Meanwhile, the domestic political turmoil overshadows the latest optimism over the signing of the US-Japan trade deal, which will entail lower trade tariffs on Japan and an upward revision of Japan's Q2 GDP growth figures.

In fact, the Cabinet Office reported this Monday that Japan's economy expanded at an annualised 2.2% rate in the April-June period from the previous quarter, much faster than the initial reading of 1.0% growth. On a quarterly basis, GDP grew 0.5% compared to a median forecast and the estimate of a 0.3% rise. This keeps hopes alive for an imminent Bank of Japan (BoJ) rate hike by the end of this year and limits deeper JPY losses.

The British Pound (GBP), on the other hand, is pressured by a modest US Dollar (USD) uptick and fiscal uncertainty ahead of the Autumn Budget in November. This, to a larger extent, overshadows the Bank of England's (BoE) cautious path of interest rate cuts due to persistent inflation worries, which, in turn, fails to assist the GBP/JPY cross to capitalize on the intraday move up and warrants some caution for bullish traders.