• GBP/JPY drifts lower for the second straight day, though it lacks follow-through selling.
• Intervention fears and BoJ rate hike bets boost the JPY, exerting pressure on the cross.
• The UK political chaos contributes to the GBP’s underperformance and the intraday fall.

The GBP/JPY cross attracts sellers for the second straight day and slides back closer to the overnight swing low during the early part of the European session on Tuesday. Spot prices, however, remain confined in a one-week-old range and currently trade just above mid-212.00s.

The outcome of Japan’s snap election on Sunday removes domestic political uncertainty. This, along with intervention warnings from Japanese authorities, underpins the Japanese Yen (JPY). Apart from this, bets that the Bank of Japan (BoJ) will stick to its policy normalization path lend additional support to the JPY, which, in turn, is seen as a key factor exerting pressure on the GBP/JPY cross.

The British Pound (GBP), on the other hand, continues with its relative underperformance on the back of political risk following the resignation of UK Prime Minister Keir Starmer’s chief aide, Morgan McSweeney. Moreover, the Scottish Labour leader called for Keir Starmer to resign over the fallout from the Jeffrey Epstein scandal. This further contributes to the offered tone surrounding the GBP/JPY cross.

Meanwhile, firming expectations that the Bank of England (BoE) will cut interest rates again mark a significant divergence in comparison to the BoJ’s hawkish outlook and favor the GBP/JPY bears . However, concerns about Japan’s fiscal situation on the back of Prime Minister Sanae Takaichi’s spending plans and a positive risk tone could cap the safe-haven JPY, which could limit losses for spot prices.

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