Today, the GBP/JPY pair continues its correction from the December high, approaching the round 207.00 level. The UK Office for National Statistics (ONS) released data showing that headline Consumer Price Index (CPI) inflation rose by 3.2% year-on-year in November. This figure declined sharply from 3.6% in October and fell short of analysts' expectations of 3.5%. In addition, core inflation, which excludes the most volatile food and energy components, increased by 3.2% over the same period—slightly below both the market forecast and the October reading of 3.4%. These figures support expectations that the Bank of England will cut its key interest rate as early as next Thursday, which could weigh on the British pound and put pressure on the GBP/JPY pair.

Moreover, the rise of the Japanese yen may be further driven by expectations of an inevitable interest rate hike, which the Bank of Japan could signal on Friday following its two-day monetary policy meeting. A key factor was a comment made last week by Bank of Japan Governor Kazuo Ueda, in which he emphasized that the likelihood of achieving the central bank's economic and inflation targets is gradually increasing. Ueda also noted that the Japanese regulator is approaching its inflation objectives, indicating the need to continue policy normalization. Heightened risk aversion in equity markets is also providing additional support for the yen as a safe-haven currency.

These fundamental factors point to a bearish trend for the GBP/JPY pair. However, market participants may refrain from opening aggressive positions and instead adopt a more cautious approach ahead of key events: the Bank of England's interest rate decision on Thursday and the Bank of Japan's final monetary policy announcement on Friday. These decisions will be crucial in determining the future direction of the GBP/JPY pair and the Japanese yen, especially in light of concerns about the deterioration of Japan's fiscal situation caused by Prime Minister Sanae Takaichi's large-scale spending plan, which could become a catalyst for the next wave of movement in this currency pair.

From a technical perspective, the nearest resistance for the pair is located at 207.75, ahead of the round 208.00 level. Meanwhile, the pair continues its correction, having fallen close to the 207.00 round number. If prices fail to hold above this level, the decline may accelerate toward the next round figure at 206.00, leaving the balance of power evenly split between bulls and bears.

However, as long as oscillators on the daily chart remain positive, the bulls are not ready to give up.