GBP/JPY pars some intraday losses, holds red below mid-191.00s

• GBP/JPY remains under some selling pressure for the second day in a row on Friday.
• BoE Governor Bailey’s dovish comments on Thursday continue to undercut the GBP.
• Geopolitical risks benefit the safe JPY and put further pressure on the cross.
• BoJ rate hike uncertainty gains for JPY and limits losses for spot prices.

The GBP/JPY cross is finding some near the 191.70 region on Friday and for now appears to have halted the sharp overnight pullback from a one-week high – levels beyond the psychological 195.00 mark. Spot prices, however, remain in negative territory for the second straight day and are currently trading just below the mid-192.00s, down nearly 0.25% for the day.

The pound sterling (GBP) continues to be undermined by overnight remarks from Bank of England (BoE) Governor Andrew Bailey, saying there is a chance the central bank will become a bit more aggressive in cutting interest rates if there is another upside. inflation news. In addition, geopolitical risks stemming from ongoing conflicts in the Middle East are driving some safe-haven flows to the Japanese yen (JPY) and contributing to the tone around the GBP/JPY cross.

Meanwhile, Asahi Noguchi, a member of the Bank of Japan (BoJ) board, said on Thursday that the central bank has room to raise interest rates further but must move cautiously and slowly to avoid damaging the economy. This, in turn, further supports the JPY, although uncertainty about future interest rate hikes by the BoJ limits the downside of the GBP/JPY cross. Japan’s new prime minister, Shigeru Ishiba, said this week that Japan is not in an environment for a further rate hike.

Moreover, Japanese Economy Minister Ryosei Akazawa said the Prime Minister and the BoJ agree that overcoming deflation is Japan’s top priority. In addition, the BoE’s chief economist, Huw Pill, said on Friday that it will be important to guard against the risk of cutting interest rates either too much or too quickly. This is helping the GBP/JPY cross bounce back around 70-80 pips from the daily low. That said, the lack of any continued buying warrants some caution for bullish traders.