On Tuesday during the European session, the GBP/JPY pair rose for the second day in a row, with quotes breaking above 212.50 on a combination of factors.

According to today's published data, Japanese household spending fell 6.8% year-on-year in September. The decline is now in its tenth consecutive month and was the largest since September 2020. That situation complicates the Bank of Japan's ability to pursue further monetary tightening. Against a backdrop of broad investor optimism and higher risk appetite, this weighs on the Japanese yen and supports GBP/JPY's rise.

At the same time, the Bank of England's rhetoric remains more hawkish than the BOJ's, giving the pound a yield advantage. Additional support for the pound comes from the weakening US dollar, which is also favorable for GBP/JPY. However, market participants opening short positions against the yen should exercise caution given ongoing talk of possible Japanese currency intervention and the expectation of an imminent BOJ rate increase.

Moreover, the Summary of Opinions following the BOJ's October meeting noted that some board members advocated faster rate increases. One justification was that core inflation has reached the central bank's 2% target. Therefore, before opening new positions betting on further GBP/JPY gains, it is sensible to wait for more convincing confirmation of buyer momentum.

For better trading opportunities, watch the preliminary estimate of UK GDP for the third quarter, scheduled for Wednesday — the results could become a new market catalyst.

From a technical perspective, oscillators are positive, confirming the bulls' advantage. At the same time, bulls have not yet pierced the double barrier of the 100- and 200-day SMAs. The 100-day EMA provides support. Below it, the pair would return toward the 200-day EMA.

The table below shows the pound's percentage change against major currencies since the start of the current week. The most notable increase was versus the US dollar.