GBP/JPY has risen to nearly 189.60, supported by a robust performance of the Pound Sterling ahead of the meeting between US President Trump and UK PM Starmer. The Bank of England’s Dhingra advocates for a swift policy easing to counteract declining consumer demand, while the Bank of Japan is expected to tighten its monetary policy further this year.

The Pound is showing strength against various major currencies today, with notable gains against the Japanese Yen. Starmer is anticipated to discuss trade policies, particularly tariffs, with Trump, who expressed a willingness to negotiate and avoid imposing tariffs on the UK.

Market speculation supports that the Bank of England will execute two interest rate cuts within the year. This follows a reduction of 25 basis points to 4.5% in a recent policy meeting, with Dhingra suggesting an even faster easing cycle than previously expected due to weak demand.

While the Yen is struggling overall, inflation persists above 2% in Japan, fostering a belief that the Bank of Japan will implement further interest rate rises this year. Encouragement from rising wage growth has also contributed to these expectations.

With Sterling pushing upward towards 189.60 against the Japanese Yen, traders have taken note of its firm performance as political and monetary shifts continue to draw attention. The upcoming meeting between Keir and Donald introduces additional stakes, particularly concerning tariff discussions. If trade restrictions are eased or avoided altogether, the Pound could maintain its strength in the short term. However, this also depends on monetary policy shifts, where views within the Bank of England differ regarding the pace of interest rate cuts.

Swati has made it clear that consumer demand is faltering and has pushed for more aggressive rate reductions. With policymakers already implementing a 25 basis-point cut to 4.5%, there is growing anticipation that this will not be the last adjustment this year. Market sentiment supports the view that at least two more cuts could follow. A faster pace of easing would, in theory, weaken the Pound, but this has not yet played out in full. For now, the UK currency is benefiting from broader market forces and an optimistic stance ahead of political negotiations.

Meanwhile, the Yen remains under pressure, though expectations for Bank of Japan tightening persist. Inflation continues to run above 2%, reinforcing the belief that interest rates will be lifted further before the year is out. Wage increases have helped solidify this outlook, making it more difficult for policymakers in Tokyo to delay further action. Any rate rises in Japan could lend support to the Yen, but traders have yet to fully price in the timing and scale of these moves.

Those trading derivatives in the coming weeks should consider the contrasting policy approaches from central banks in London and Tokyo. While Sterling remains supported for now, the Pound’s trajectory could shift as further details emerge around both trade policy talks and interest rate strategies. Uncertainty lingers, particularly with the timeline of monetary moves still very much at play.