GBP/JPY trades firmly near yearly high above 204.00 on fading BoJ hawkish bets

• GBP/JPY refreshes yearly high near 204.50 on Wednesday amid continued weakness in the Japanese Yen.
• Traders pare bets supporting interest rate hikes by the BoJ in the policy meetings remaining this year.
• Investors await BoE Pill's speech for fresh cues on the monetary policy outlook.

The GBP/JPY pair exhibits strength near a fresh yearly high around 204.50 during Wednesday's European trading session, posted earlier in the day. The pair strengthens as underperformance from the Japanese Yen (JPY), with investors anticipating that the Bank of Japan (BoJ) will not tighten its monetary policy further in the near term.

BoJ hawkish bets have disappeared since the election of Sanae Takaichi as Japan's Prime Minister who has favoured higher fiscal spending and tax cuts, and argued against tight monetary policy conditions.

Analysts at MUFG have stated that Japan's rates markets have priced out a central bank rate hikes for this calendar year, following Takaichi's win, and now see the next hike possibly coming only in March 2026.

Fading BoJ hawkish bets have resulted in weakness in the Japanese Yen, which was outperforming in past few months as Japan's central bank was keeping the door open for further interest rate hikes.

Though investors have underpinned the Pound Sterling (GBP) against the Japanese Yen, the former is exhibiting a mixed performance against its other peers. Meanwhile, investors seek fresh cues about whether the Bank of England (BoE) will cut interest rates in the remainder of the year.

Market experts are mixed about whether the BoE will loosen monetary policy conditions further this year as inflationary pressures remain almost double the central bank's target of 2%, and the job market continues to deteriorate. In Wednesday's session, investors will focus on the speech from BoE Chief Economist Huw Pill, which is scheduled at 15:00 GMT.