The pound rebounded to above 199 against the yen, and the BOE and BOJ policy divergence supported the cross-trade

GBP/JPY trailed from a high of 200.35 this week and rebounded on Wednesday. In the UK, market bets on an immediate rate cut fell, supporting the relative performance of the pound.

In Japan, the yen is affected by domestic political uncertainty, and the market is worried that US policy and the international situation may force the BoJ to slow down policy normalization. At the same time, investors' expectations that the BoJ may raise interest rates this year continue to exist, which provides some support for the yen and may limit the further upside of GBP/JPY.

In addition, rising risk appetite is also an important factor supporting the GBP/JPY rally. But geopolitical tensions and continued trade-related uncertainty could limit the yen's downside, forming an upper limit to the cross-trade upside.

"The policy divergence between the BoJ and the BoE makes the GBP/JPY still need to be cautious in the short-term rebound, especially in the absence of key economic data catalysis," the analysts pointed out.

Market Outlook and Key Events In the short term, investors are likely to wait to see the UK's upcoming macroeconomic data, including Friday's monthly GDP data. These data will provide a key boost to the pound and could influence the next move of GBP/JPY.

GBP/JPY rebounded in the Asian session on Wednesday. The technical side shows that near the low point on Tuesday, about 198.50-198 area is the main support, and it may fall below the 197.50 level. The recent high of 200.35 is a key resistance. If it breaks through, it may re-test the 200.50 and 201 psychological levels.

The short-term trend remains strong, but investors need to be aware of the risk of volatility in the absence of strong economic data.

Editor's opinion: GBP/JPY's short-term recovery benefited from the relative strength of the pound and improved risk appetite, but the policy support of the yen and political uncertainty limited the cross-trading to further rise. Pay attention to UK macro data and yen policy signals to judge the follow-up breakout or consolidation range.