GBP is higher against JPY on Monday, helped by moderate optimism linked to a peace plan to end the war in Iran. The pair is still capped below resistance at 211.45, while some technical signals point upwards. Iran and the US have received a framework for a 45-day ceasefire that could stop hostilities at once and reopen the Strait of Hormuz. This has led to selling of safe-haven assets such as the US Dollar and more demand for risk-linked currencies such as GBP.

Ceasefire Driven Risk Sentiment

Market participants remain cautious about large JPY short positions. USD/JPY is near 160.00, a level linked in market talk to possible action by Tokyo authorities to limit JPY weakness. GBP/JPY has a mild uptrend after rebounding from 209.64 in late March, with higher lows last week. A bullish engulfing daily candle may support a larger move if the pair closes above 211.45. On the 4-hour chart, RSI is just above 50 and MACD is in positive territory. A Gartley pattern points to targets at 212.30, then 212.55, while support sits at 210.35 and 209.64. A correction on April 6 at 11:55 GMT set the April 2 low at 210.35, not 212.35. The technical analysis was produced with help from an AI tool.

Rate Divergence And Carry Trade Focus

We are seeing a different landscape now compared to the optimism around this time in 2025. Last year, markets were buoyed by hopes of a peace plan in Iran, which favored riskier assets like the Pound. Today, the focus has shifted from geopolitical shocks to the stark reality of monetary policy divergence. The interest rate difference between the UK and Japan is the main story, creating a powerful incentive for carry trades. With the Bank of England’s rate holding firm at 5.25% and UK inflation at 3.4% as of February 2026, the yield on the Pound is highly attractive. This contrasts sharply with the Bank of Japan’s recent move to a 0.1% interest rate, its first hike in 17 years, which is still negligible in comparison. This massive yield gap suggests that holding long Pound positions against the Yen remains a fundamentally sound strategy for earning daily interest, or ‘carry’. However, we must remain cautious about the risk of a sudden JPY rally, similar to the concerns in 2025. With USD/JPY currently trading around the 157.00 level, verbal warnings from Japanese officials about “excessive volatility” have become more frequent, keeping the threat of intervention very much alive. For derivative traders, this environment favors strategies that can profit from the upward trend while managing the risk of a sudden JPY strengthening event. Buying call options on GBP/JPY offers a way to capture further upside with a defined, limited risk if the Bank of Japan intervenes. Alternatively, those holding long positions could buy put options as a form of insurance against a sharp, unexpected downturn. Looking at the charts, the pair is currently consolidating near recent highs, finding support around the 200.50 mark. A break above the multi-year peak of 202.80 would signal a continuation of the primary trend. The key is to manage the risk of a sudden spike in volatility, which historically can cause moves of 3-4% in a single day following intervention. Create your live VT Markets account and start trading now.

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