GBP/JPY slides to 199.25, one-week low amid modest JPY strength, UK fiscal concerns

• GBP/JPY turns lower for the second straight day amid the emergence of some JPY buying.
• Concerns about the UK's fiscal situation and the BoE's dovish tilt also weigh on the cross.
• A weaker USD benefits the GBP and could support spot prices amid a positive risk tone.

The GBP/JPY cross attracts fresh sellers following an Asian session uptick to the 199.75-199.80 region and turns lower for the second straight day on Tuesday. Spot prices slide to a one-week low, around the 199.30-199.25 area in the last hour, though the downtick lacks bearish conviction amid mixed cues.

The Summary of Opinions from the Bank of Japan's (BoJ) September policy meeting showed that board members debated the feasibility of raising interest rates in the near term. This, to a larger extent, overshadows the disappointing release of Industrial Production figures and Retail Sales data from Japan, and provides a modest lift to the Japanese Yen (JPY), which, in turn, is seen as a key factor exerting some pressure on the GBP/JPY cross.

The British Pound (GBP), on the other hand, continues with its relative underperformance amid concerns over the UK's fiscal outlook ahead of the Autumn budget in November. Moreover, the Bank of England (BoE) Governor Andrew Bailey's dovish remarks last week, saying that there will be further reductions in the bank rate, mark a significant divergence in comparison to the BoJ's hawkish outlook and weigh on the GBP/JPY cross.

However, a weaker US Dollar (USD) offers some support to the GBP. Furthermore, a generally positive risk tone keeps a lid on any meaningful appreciation for the safe-haven JPY and helps limit the downside for the GBP/JPY cross. Hence, it will be prudent to wait for strong follow-through selling before positioning for an extension of the recent pullback from the 201.25 area, or the highest level since July 2024, touched earlier this month.