The GBP/JPY cross attracted buyers after a modest retracement that occurred yesterday from the 214.65–214.70 area, where a new monthly high was also recorded. In Wednesday morning trade the pair showed moderate intraday gains, adding about 0.10 percent, and appeared poised for further upside against a supportive fundamental backdrop.

The pound is receiving support from a slight weakening of the US dollar and from a broadly negative bias toward the Japanese yen, which underpins a constructive short-term outlook for GBP/JPY. The yen is under pressure from major global currencies amid economic concerns tied to the protracted Middle East conflict and persistent energy supply instability.

Reduced shipping activity in the strategically important Strait of Hormuz is drawing particular attention, as restrictions imposed by Iran and the US military presence are weighing on transport volumes. In addition, talks between the United States and Iran on core issues, including Iran's nuclear program and control of the strait, have elevated the geopolitical risk premium. That premium continues to depress the yen, even as market participants price a more hawkish policy stance for the Bank of Japan.

Deputy Governor of the Bank of Japan Ryozo Himino said on Tuesday that the central bank would continue to raise its policy rate, guided by data on activity, inflation, and financial conditions. Even speculation about possible intervention by Japanese authorities to support the currency has failed to deter yen bears. That implies the path of least resistance for GBP/JPY is upward, reinforcing the case for further strengthening in the cross.

Traders are simultaneously revising expectations for the timing of the Bank of England's next hike into December, after UK consumer price inflation unexpectedly slowed to 2.8% year-on-year in April. Moreover, political instability in the United Kingdom and increasing calls for Prime Minister Keir Starmer's resignation may restrain pound bulls from aggressive positioning and limit further gains in GBP/JPY.

From a technical perspective the pair is trading above all major moving averages and is targeting 214.70 ahead of the round 215.00 level. Support is located just above the round 214.00 mark. The relative strength index has moved into positive territory, indicating that bulls may be able to reach their target.

The table below shows percentage changes in the yen's exchange rate versus key currencies for this month. The Japanese yen has registered its largest gains against the Canadian dollar.