Both GBP/JPY and USD/JPY currency pairs experienced notable volatility on Wednesday amid shifting geopolitical developments in the Middle East. GBP/JPY rebounded from a four-week low, climbing to the mid-210.00s during the early European session, snapping a four-day losing streak. This recovery was attributed to improved global risk sentiment following US President Donald Trump's remarks that US military forces will exit the Iran war within two to three weeks, which undermined demand for safe-haven assets and contributed to the Japanese Yen's underperformance against the British Pound [1].
Meanwhile, USD/JPY extended its losing streak for the third consecutive day, trading 0.26% lower near 158.30. The pair faced selling pressure as oil prices corrected sharply due to intensified hopes of a ceasefire in the Middle East. Iranian President Masoud Pezeshkian reportedly told EU Council President António Costa that Iran is ready to end the war with the US, provided the US guarantees no repetitive aggression. This development improved the appeal of currencies like the Yen, whose economies rely heavily on oil imports [2]. The US Dollar Index (DXY) also traded 0.3% lower near 99.50, reflecting diminished demand for safe-haven assets [2].
Technical analysis for USD/JPY indicates a neutral-to-mild bearish bias as the pair slipped below the 20-day Exponential Moving Average (EMA) near 158.60, with repeated failures to extend gains above resistance levels at 159.00, 159.80, and 160.40. The 14-day Relative Strength Index (RSI) retreated to near 50.00, signaling fading upside pressure. Immediate support is at the March 19 low of 157.50, with further downside risk toward the February 25 high at 156.82 if selling persists [2].
For GBP/JPY, while the cross benefited from risk-on sentiment and Middle East de-escalation hopes, reports that the UAE is pushing for military action to reopen the Strait of Hormuz raised concerns about broader regional escalation. Japan's reliance on Middle Eastern oil imports continues to fuel worries about economic strain, weighing on the Yen. Speculation about Japanese authorities intervening to stem further currency weakness could limit deeper losses for the Yen. Additionally, the Bank of England's hawkish signals regarding a potential rate hike in April amid inflation fears stemming from Middle East conflicts may cap gains for the Pound [1]. Traders are also awaiting the final UK Manufacturing PMI, which could influence GBP price dynamics [1].
According to the latest currency performance table, the British Pound was the strongest against the US Dollar, up 0.39%, and gained 0.23% against the Japanese Yen [1].
CONCLUSION
Ceasefire hopes in the Middle East have boosted risk sentiment, leading to a recovery in GBP/JPY and a correction in USD/JPY as safe-haven demand wanes. However, ongoing geopolitical risks and central bank policy signals may limit further gains and keep volatility elevated. Investors are closely watching upcoming macroeconomic data and potential interventions for additional market direction.