On Monday, the British pound (GBP) fell against the Japanese yen (JPY) amid the yen's strengthening across all currencies after Japanese authorities intensified verbal interventions amid the sharp rise in the USD/JPY rate to 160.00 – a level that has previously prompted official action.

On Monday, Japan's chief currency diplomat, Atsushi Mimura, stated that authorities do not rule out taking any measures in response to excessive volatility in the currency market. He emphasized that speculative activity in currency markets is increasing and added that if such dynamics persist, "decisive actions may soon be required."

Meanwhile, the Bank of Japan's commentary reflects growing concern among policymakers. One central bank member noted that if inflationary pressures intensify due to an excessively weak yen or if the effects of a second wave of inflation become more pronounced, further monetary policy tightening may be necessary.

Another meeting participant added that the central bank should carefully monitor whether it will need to accelerate the pace of interest rate hikes or transition to more neutral or even restrictive financial conditions in the event of heightened tensions in the Middle East.

Additionally, the Governor of the Bank of Japan, Kazuo Ueda, stated that the central bank will continue to closely monitor currency market dynamics and assess its impact on achieving the target inflation level of 2%. According to him, the Bank of Japan will adjust monetary policy based on how exchange rate fluctuations reflect on growth prospects, price dynamics, and associated risks.

The verbal interventions have helped support the yen; however, volatility is likely to remain high amid high oil prices, as the ongoing war between the US and Israel and Iran intensifies inflationary pressures associated with a weak currency, pushing the Bank of Japan toward further monetary tightening.

Simultaneously, traders are reassessing expectations for monetary policy and reducing their anticipation of imminent rate hikes in major economies, increasingly focusing not on inflation but on growth slowdown risks due to rising energy prices.

In the UK, market participants have lowered expectations for a Bank of England rate hike in April; however, they still factor in approximately two increases by the end of the year, sharply contrasting with previous expectations of rate cuts.

In the near term, attention will be focused on a number of publications, including the Tokyo Consumer Price Index, unemployment data, and retail sales in Japan, as well as UK GDP data for the fourth quarter, which will be released on Tuesday and may set a new direction for the GBP/JPY pair.

From a technical perspective, the pair has fallen below the 50-day SMA but remains above the round level of 210.00, just below which lies the 100-day SMA, indicating that bulls are not ready to give up globally. It is also worth noting that oscillators are mixed, but the relative strength index has turned negative, showing weakness among the bulls. However, bulls need to return above the 213.00 level to continue their gains. If prices do not hold the current level and the 200-day SMA, the situation for the bulls will worsen.