Sterling Gains Momentum Against Struggling Yen

The How much will Ethereum be worth in 2025?GBP/JPY cross has demonstrated remarkable strength in recent trading sessions, climbing over 1% as market participants react to shifting macroeconomic conditions. This movement reflects the Pound Sterling's resilience against a Japanese Yen that continues to face downward pressure from central bank policies.

UK Inflation Surprise Lifts Sterling

Wednesday's UK Consumer Price Index (CPI) release showed monthly inflation rising 0.4% in December, significantly exceeding market expectations of 0.2%. This positive surprise follows November's -0.2% reading, indicating more persistent price pressures than economists anticipated. The stronger inflation print has led markets to reconsider the timeline for potential Bank of England rate cuts, providing support for the British currency.

Additional confirmation came from the Retail Price Index, which rose 0.5% versus forecasts of 0.4%. These figures collectively suggest the UK economy may maintain higher interest rates for longer than previously expected, creating favorable conditions for GBP appreciation.

Bank of Japan Policy Continues to Weigh on Yen

On the other side of the currency pair, the Japanese Yen remains under pressure due to the Bank of Japan's commitment to ultra-loose monetary policy. BOJ officials have expressed concerns about inflation potentially falling below their 2% target, justifying their cautious approach to policy normalization. This stance contrasts with other major central banks and continues to create headwinds for JPY.

Market participants will monitor upcoming Japanese Machinery Orders data for November, with expectations pointing to a 0.8% monthly decline following October's 0.7% growth. The year-over-year comparison is forecast to show modest improvement from -2.2% to 0.2%.

Technical Perspective on GBP/JPY Movement

From a chart perspective, the pair has shown consistent upward momentum since rebounding from support near 180.00 in early January. The recent break above 186.00 has opened the path toward testing higher psychological levels, with 189.00 appearing as the next significant barrier.

The 200-hour Simple Moving Average currently lags at 185.00, suggesting the pair would need to correct approximately 1.6% from current levels to return to the mean. On the daily timeframe, the 50-day SMA near 184.00 provides technical support, while resistance appears at multi-year highs above 188.66.

Upcoming Market Catalysts

Friday's UK Retail Sales report for December will provide the next important data point for GBP traders. Current market consensus anticipates a -0.5% monthly change following November's 1.3% increase, with year-over-year growth expected at 1.1% compared to the previous 0.1% reading.

These fundamental factors, combined with the technical setup, suggest the GBP/JPY pair may continue experiencing volatility as traders assess the relative strength of these two currencies in the current macroeconomic environment.