British Pound rebounds swiftly from one-month low against broadly weaker Yen

The GBP/JPY cross stages a goodish intraday recovery from the vicinity of the 210.00 psychological mark, though it remains on track to register heavy weekly losses. Spot prices climb to the 211.80 area during the early European session on Friday and, for now, seem to have snapped a two-day losing streak to a one-month low, touched the previous day.

As investors price in a more hawkish Bank of Japan (BoJ), persistent worries about Japan's worsening fiscal conditions prompt some selling around the Japanese Yen (JPY). In fact, Japan's initial general-account budget requests are estimated to total around ¥143 trillion (about $894 billion), marking a record high for the fourth consecutive year. This comes amid doubts over Prime Minister Sanae Takaichi's ability to balance fiscal responsibility amid her ambitious investment strategy, which keeps a lid on the JPY and triggers an intraday short-covering move around the GBP/JPY cross.

Furthermore, borrowing costs in Japan will remain significantly lower than in other major economies despite expectations for a faster BoJ policy tightening, which, in turn, keeps the so-called JPY carry trade active. The British Pound (GBP), on the other hand, attracts some follow-through buying and is seen as another factor supporting the GBP/JPY cross. That said, reduced bets for an interest rate hike at the Bank of England's (BoE) September meeting might cap the GBP, making it prudent to wait for strong follow-through buying before confirming that the cross has bottomed out.