- UK politics with PM Starmer under pressure to resign and Japanese politics with PM Takaichi's election win have influenced GBP/JPY this week
- The BoE's split voting on interest rates signals a potential cut when its MPC meets next
- Bank of Japan's January Outlook shows that inflation is stabilising around 2% target, which could support the economy and the yen
The GBP/JPY pair has edged up slightly since the beginning of 2026, gaining 0.6% so far this year. but recently faced some difficulties after dropping below 210 on February 11. For the past couple of days, the British Pound has been struggling against the Japanese Yen, and this decline is continuing in the current European trading session. So, what’s going on?
Why GBP/JPY Cooled Suddenly
The main reason for the shift appears to be a change in political and economic sentiment in Japan and the UK. The GBP/JPY decline started after Prime Minister Keir Starmer wouldn’t resign due to pressure related to Epstein-Mandelson scandal, which pushed the pair to an eight-day low. Japan’s yen is getting stronger because the Bank of Japan (BoJ) is hinting at tighter monetary policy. At the same time, the Bank of England’s (BoE) cautious stance is holding back the pound.
According to the Bank of Japan’s (BoJ) January 2026 Outlook Report, the central bank seems confident that inflation is stabilizing around its 2% target. This confidence is boosted by Prime Minister Sanae Takaichi’s recent big election win. Usually, when the ruling LDP wins, it suggests things will stay the same.
But this time, markets interpret Takaichi’s win differently. Her plans for targeted spending and tax cuts are being seen as a reason for the BoJ to raise interest rates faster than expected. In London, the Bank of England’s (BoE) February 2026 Monetary Policy Report sounded more careful. They kept interest rates at 3.75%, but the 5–4 vote shows that some committee members are considering cuts, because UK inflation is projected to fall toward 2.1% by the second quarter.
Is a Reversal in the Making?
This weakness might not last long, and the pair could bounce back if support levels hold. But J.P. Morgan’s 2026 outlook suggests that the British pound has some underlying problems, so any rebound might not be huge if worries about the UK economy reappear. Continuous political uncertainty in the UK could cause a bigger reversal if the trend changes.
The direction of the pair will depend on the policies of the two central banks, with the BoE potentially cutting rates while the BoJ raises them. Takaichi’s spending plans might weaken the yen, potentially leading to gains for GBP/JPY, according to J.P. Morgan. Stable conditions in Japan are also helping Japanese stocks.
If there’s a general sense of risk-off in the market, the yen’s safe-haven status could make it stronger, presenting opportunities for traders to profit from short positions. Risks include possible joint interventions, which could limit the pair’s rise around 215.00. There are also opportunities in carry trade if the differences between the two countries’ policies continue.
GBP/JPY Forecast
GBP/JPY pivot mark is at 210.90 and its immediate support is at the YTD lows around 209.90. If it falls below this level, it could go down to the 208.33 mark. On the upside, primary resistance is now at 211.55, with the second one at the Volume Weighted Moving Average (VWMA) at 212.29. The MACD indicator is mixed but being above the signal line indicates a possible recovery.
GBP/JPY with key resistance and support levels on February 11, 2026. Created on TradingView
UK Prime Minister Keir Starmer’s choice not to resign caused a selloff, sending the pair to an eight-day low. The BoE’s dovish vote contrasted BoJ hikes.
The February meeting showed a 5–4 split, meaning the UK is just one vote away from a rate cut. As inflation falls toward 2%, the BoE is expected to ease, which removes the yield support for the GBP.
The big win by PM SanaeTakaichi gives the government confidence to raise interest rates without fearing a market crash. This policy normalization is the major support the yen has had for years.