GBP/JPY eases from 214.00 highs with the bullish trend intact

GBP/JPY eases below 214.00 after hitting fresh all-time highs at 214.30.

The Yen is weakening sharply this week following news of snap elections in Japan.

On Thursday, the UK monthly GDP report might give a fresh boost to the Pound.

The Sterling is pulling back from all-time highs at 214.30 hit earlier on Wednesday, but remains steady in the upper range of the 213.00s so far. The Yen is showing the weakest performance among major currencies this week, with investors so far unfazed by the looming intervention threats by Japanese authorities.

The Yen has tumbled on Wednesday after a local newspaper reported that Japan’s Prime Minister Sanae Takaichi would be considering dissolving the lower house next week and calling snap elections on February 8.

Takaichi trade crushes the Yen

Investors fear that the elections' outcome might provide Takaichi with a wider parliamentary support to continue her policy of large stimulus and low interest rates in a country with an already high fiscal deficit. This has fuelled a new wave of the so-called “Takaichi trade” consisting of selling JPY and long-term Japanese Government Bonds (JGB).

Japan’s finance minister Satsuki Katayama affirmed on Tuesday that she and US Treasury Secretary Scott Bessent are concerned about “one-sided depreciation” in the Yen. The market, however, sees the possibility of an upcoming election as a significant hindrance to an FX intervention and keeps selling the Yen across the board. 

The Pound, on the other hand, remains fairly bid in a calm market session, awaiting the monthly Gross Domestic Product report, due on Thursday. The market is forecasting 0.1% rebound of economic growth in December, after a 0.1% drop in November.