GBP/JPY flat lines around 200.00, below multi-year top ahead of key central bank decisions

• GBP/JPY kicks off the new week on a softer note and eases from its highest level since July 2028.
• The divergent BoE-BoJ policy expectations turn out to be a key factor capping gains for the cross.
• The downside seems limited as traders keenly await the BoE and BoJ policy meetings this week.

The GBP/JPY cross struggles to capitalize on last Friday's closing above the 200.00 psychological mark for the first time since August 2008 and edges lower at the start of a new week. The downtick, however, lacks bearish conviction ahead of this week's key central bank event risks.

The Bank of England (BoE) is scheduled to announce its policy decision on Thursday and is widely anticipated to leave the key benchmark interest rate unchanged at 4%. Moreover, the central bank is seen maintaining a cautious wait-and-see approach for the rest of 2025 amid the recent rises in inflation expectations. This continues to underpin the British Pound (GBP) and acts as a tailwind for the GBP/JPY cross.

The Japanese Yen (JPY), on the other hand, continues with its struggle to attract any meaningful buyers amid expectations that domestic political turmoil could give the Bank of Japan (BoJ) more reasons to delay raising interest rates. This might contribute to limiting any meaningful corrective slide for the GBP/JPY cross. That said, investors seem convinced that the BoJ will stick to its policy normalization path.

The recent US-Japan trade agreement has eliminated a key source of uncertainty. Moreover, an upward revision of Japan's Q2 GDP growth figures, along with a tight labor market and a rise in real wages for the first time in seven months, backs the case for another rate hike by the BoJ this year. This marks a divergence in comparison to relatively dovish BoE expectations and could cap the GBP/JPY cross.

Hence, the market focus will also be on the outcome of a two-day BoJ policy meeting on Friday. In the meantime, the UK monthly employment details on Tuesday, along with the latest UK consumer inflation figures on Wednesday, might influence the GBP and provide some impetus to the GBP/JPY cross. The market reaction, however, is likely to be muted heading into the key central bank event risks.