GBP/JPY falls toward 198.50 after hawkish comments from Japan’s Finance Minister Suzuki

• GBP/JPY depreciated as Japan’s Suzuki mentioned taking action against excessive currency volatility if needed.
• Japan's foreign exchange reserves declined to $1,231 billion in May, reaching their lowest level since February 2023.
• The slower progress in the disinflation process diminishes the likelihood of multiple BoE rate cuts this year.

GBP/JPY extended losses for the second consecutive day, trading around 198.70 during the European hours on Friday. The GBP/JPY cross faced pressure following hawkish comments from Japanese Finance Minister Shunichi Suzuki.

Minister Suzuki stated that he would take action against excessive currency volatility when necessary and would assess the effectiveness of interventions. Suzuki also emphasized the importance of maintaining market trust in public finances and mentioned that there is no fund limit for FX intervention, according to Reuters.

However, the advance of the Japanese Yen (JPY) could have been limited as Japan’s Foreign Reserves, released by the Ministry of Finance for May, showed a significant drop to $1,231 billion from $1,279 billion. This marked the lowest level since February 2023, as the government conducted foreign exchange intervention operations to defend the JPY.

In the United Kingdom (UK), Halifax House Prices (YoY) increased by 1.5% in May, marking the sixth consecutive month of growth and accelerating from a 1.1% rise in April, exceeding forecasts of 1.2%. Traders will likely to focus on the employment data for the February-April period, which will be released on Tuesday.

The UK's number of employed people has declined for three consecutive periods. Indications of further layoffs could negatively impact the Pound Sterling (GBP), as it would increase traders' expectations for early rate cuts by the Bank of England (BoE).

Although UK annual headline inflation dropped significantly to 2.3% in April. BoE policymakers remain concerned about the slower progress in the disinflation process within the services sector, reducing the likelihood of multiple BoE rate cuts this year.