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GBP/JPY has extended its gains for the third consecutive day as traders recalibrate expectations around monetary policy from the Bank of England (BoE) and Bank of Japan (BoJ). Rising oil prices, fueled by heightened tensions between the US and Iran, have reignited global inflation concerns, prompting markets to scale back bets on BoE rate cuts. The BoJ’s dovish stance and potential yen weakness against the pound are amplifying the cross’s upward momentum. This shift reflects a broader recalibration of central bank policy risks in a volatile geopolitical climate. For forex traders, the GBP/JPY cross is becoming a focal point due to its sensitivity to both BoE policy shifts and BoJ interventions. The BoE’s recent hawkish rhetoric, combined with the BoJ’s prolonged ultra-loose monetary policy, creates a widening yield differential that favors long positions in GBP/JPY. Additionally, oil price volatility adds a commodity-driven layer to the cross’s dynamics, as energy costs directly impact UK and Japanese economies differently. Investors should monitor BoE’s upcoming policy statements and inflation data from both the UK and Japan. The BoJ’s potential response to yen weakness and global inflation trends will also shape GBP/JPY’s trajectory. For Gulf investors, the cross’s performance could influence hedging strategies and currency exposure in diversified portfolios.
