The British Pound (GBP) traded lower against the Japanese Yen (JPY) during the European session on Friday, down approximately 0.17% to near 209.45, as the Yen outperformed major currencies amid rising fears of coordinated intervention by the United States and Japan to support the Yen [1]. Japanese Finance Minister Satsuki Katayama stated that US President Donald Trump expressed concern over the Yen's weakness during a meeting with Japanese Prime Minister Sanae Takaichi in New York, and referenced the July 31 joint intervention by Tokyo and Washington to counter excessive volatility [1]. Katayama emphasized that the principles behind previous joint interventions remain relevant [1].
The Japanese Yen was the strongest performer among major currencies on the day, gaining 0.29% against the British Pound and 0.44% against the US Dollar [1]. The Yen's recovery followed a period of underperformance after the Bank of Japan (BoJ) raised its policy rate by 25 basis points, a move that initially triggered renewed Yen weakness due to dissent among policy board members [1].
Meanwhile, the British Pound underperformed its major peers throughout the week, declining 1.27% against the US Dollar and 0.11% against the Japanese Yen [2]. The GBP traded with caution, hovering near a three-month low against the USD at around 1.3220 during the European session [2]. Analysts attributed the Pound's weakness to growing skepticism over the Bank of England's (BoE) willingness to tighten monetary policy further. Brown Brothers Harriman (BBH) strategists noted a disconnect between market pricing—which implies about 100 basis points of BoE rate hikes in the next twelve months to 4.75%—and their own expectations, arguing that the BoE may not need to tighten as much as markets anticipate [2]. BBH highlighted that the UK economy is already operating below capacity, the current Bank Rate of 3.75% is near the top of the BoE’s estimated neutral range, and fiscal policy is likely to become more restrictive [2].
In contrast, the US Dollar outperformed this week, supported by hawkish Federal Reserve expectations following strong S&P Global PMI data for September and warnings from Fed officials about persistent inflation risks [2]. The CME FedWatch tool indicated an almost 58% probability of Fed rate hikes at both remaining policy meetings this year [2].
CONCLUSION
The British Pound faced significant pressure this week, underperforming against both the Japanese Yen and the US Dollar due to intervention fears and doubts over further BoE tightening. Market sentiment remains cautious, with intervention risks supporting the Yen and hawkish Fed expectations boosting the Dollar, while the Pound is weighed down by a less optimistic UK policy outlook.