GBP/JPY retreats from 204.00 amid fiscal concerns, BoE easing hopes 

• The Sterling dives to session lows below 203.00 against the Yen, after rejection at the 204.00 area.
• News that UK Chancellor Reeves is planning to ditch tax-rising plans has hit the Sterling.
• Yen rallies remain limited amid dwindling hopes of BoJ tightening in December.

The Pound is retracing gains against the Japanese Yen on Friday, after failing to break above the 204.00 area. A combination of concerns about the UK's fiscal health and weak macroeconomic data, which heightened hopes of a BoE rate cut, is weighing on the Sterling, which has dropped to session highs at 202.65 so far.

Pound crosses are trading lower on Friday, hit by a Financial Times report suggesting that Prime Minister Keir Starmer and finance minister Rachel Reeves would be considering ditching their plans to raise the income tax at the November 26 budget report. This move would be positive for the economy, but it might leave doubts about the UK's government debt unresolved.

UK economy slowed down in Q3

Beyond that, a raft of grim UK data releases on Thursday failed to improve confidence in the economic outlook. Preliminary Gross Domestic Product figures showed that growth slowed down to levels right above stagnation in the third quarter, with industrial and manufacturing production contracting sharply in September.

These figures have boosted expectations that the Bank of England will be forced to ease monetary policy further at its December meeting, which is weighing heavily on the Pound.

The Yen, on the other hand, is failing to fully capitalize on the Pound's weakness as pressures from Japanese Prime Minister Sanae Takaichi on the Bank of Japan to keep interest rates at low levels have curbed hopes of a December rate hike and are keeping JPY's upside attempts limited.