The pound holds its ground

GBP/JPY

Key zone: 213.50- 214.50

Buy: 214.50 (after retesting the 214.00 level); target 216.50-218.00; StopLoss 214.00

Sell: 213.00 (on strong negative fundamentals) ; target 211.50-210.00; StopLoss 213.50

The British pound is showing relative resilience despite mounting political pressure. Keir Starmer’s approval rating is declining, and the Labour Party risks losing ground in local elections. At the same time, pressure on the UK bond market is not directly translating into currency weakness—investors have yet to fully price in political risks.

The key source of uncertainty remains the upcoming meeting of the Bank of England. Against this backdrop, macroeconomic data will be the main driver of the pound’s next move.

• Markets are pricing in higher uncertainty, increasing volatility. If political tensions escalate after the elections, the pound could come under pressure.
• Geopolitical tensions in the Middle East have boosted demand for the U.S. dollar as a safe-haven asset. Rising oil prices are increasing inflation risks in the U.S., raising the probability of a Federal Reserve System rate hike from 11% to 32%.
• Europe is facing stagflationary pressure: expensive energy is both accelerating inflation and constraining economic growth.

Recall: the Bank of England kept rates unchanged at 3.75% at its April 30 meeting (8 votes to 1). The only supporter of tightening was Chief Economist Huw Pill.

In its monetary policy report, the regulator outlined three economic scenarios, none of which assumes a direct recession. This reflects a cautious public stance: inflation and slowing growth are acknowledged but not emphasized in aggressive rhetoric.

As a result, the potential for further rate hikes is limited at this stage—and so is an additional driver for pound appreciation. The next key data point will be the National Institute of Economic and Social Research GDP forecast, which will help compare real growth with current PMI readings.

Regarding GBP/JPY dynamics:

An important external factor is Japan’s currency policy. Under International Monetary Fund rules, the country can conduct a limited number of interventions (two to three three-day operations over six months) to maintain its free-floating exchange rate status.

The recent sharp strengthening of the yen following government intervention highlighted the vulnerability of short positions. At the same time, last week’s series of interventions is considered a single operation, leaving room for further action.

Japan’s Finance Minister Satsuki Katayama confirmed readiness for further intervention to curb speculative volatility. According to Bloomberg, the options market estimates a roughly 52% probability that the yen will return to the ¥160 level by the end of June.

The pound remains supported by market inertia and the absence of clear monetary signals, but the fundamental backdrop is fragile. Political risks, external geopolitics, and uncertainty in central bank actions create potential for increased volatility. Future GBP dynamics will depend on macroeconomic data and political developments both within the UK and globally.

According to Bloomberg data, options traders still estimate the probability of the yen falling again to ¥160 by the end of June at around 52%.

So we act wisely and avoid unnecessary risks.

Profits to y’all!