British Pound trades higher against Japanese Yen, UK GDP data beats estimates

• The British Pound rises to near 209.10 against the Japanese Yen amid better-than-projected UK GDP data.
• The US economy expanded 0.1% in August, while it was expected to contract at the same pace.
• BoE’ Pill favors modest policy tightening, argues against a series of interest rate hikes.

The British Pound (GBP) is up 0.2% at around 209.10 against the Japanese Yen (JPY) during the European trading session on Thursday. The cross gains as better-than-expected United Kingdom (UK) monthly Gross Domestic Product (GDP) data for August has lend strength to the domestic currency.

The Office for National Statistics (ONS) has reported that the economy expanded 0.1%, while it was expected to contract at a same pace. In July, the GDP growth rate was 0.4%.

Month-on-Month Industrial and Manufacturing Production data grew strongly by 1.2% and 0.8%, respectively, while both were anticipated to decline by 0.1%.

This has come as a relief for the UK administration at a time when it is gearing up for the budget announcement on October 28. Ahead of the budget announcement, UK Chancellor of the Exchequer John Healey has promised to maintain fiscal discipline.

This week, UK Chancellor Healey said that the government is set to finance all new measures, including a cost-of-living support package, through higher taxes or reductions in public spending rather than additional borrowing, the Financial Times (FT) reported.

On the monetary policy front, the comments from Bank of England (BoE) Chief Economist Huw Pill said on the sidelines of International Monetary ​Fund (IMF) meetings signal that he is in favor of an interest rate hike, but don’t want investors to interpret it a start of the policy-tightening cycle.

Pill tempers rate hike expectations, limiting upside for Pound

BoE Chief Economist Pill’s speech scores 3/10 on FXS Speechtracker, well below the historic average of 6.4/10, signalling a notably more dovish tone. The remark that a hike now should not be seen as the start of a series of increases clearly downplays the prospect of a sustained tightening cycle, curbing support for the Pound versus the Dollar and Euro.

By framing any potential move as a one-off adjustment rather than the beginning of a hiking path, Pill reduces the perceived policy risk premium that typically underpins Pound strength. This shift toward caution suggests markets may reassess the trajectory of UK rates, limiting upside for the Pound and favouring currencies where expectations for persistent tightening remain more robust.