The GBP/JPY pair has been demonstrating a steady recovery this week, rebounding from around 187.00, the lowest level since September 2024. On Thursday, the pair extended its positive momentum for the fourth consecutive day, though spot prices remain below the key psychological level of 193.00.

Optimistic UK macroeconomic data has been supporting the pound's recovery. The UK Office for National Statistics (ONS) reported an unexpected 0.1% quarter-on-quarter GDP growth for the three months ending in December 2024, following zero growth in the previous quarter. Year-on-year GDP growth for Q4 reached 1.4%, exceeding expectations of 1.1% and the 0.9% increase seen in Q3.

Additionally, industrial production and manufacturing output data also outperformed forecasts, contributing to the pound's modest rise.

The weakness of the Japanese yen is another key factor driving GBP/JPY higher. Investors remain cautious about the potential economic consequences of President Donald Trump's new tariffs on raw material imports, adding further uncertainty to global markets. Meanwhile, positive sentiment in equity markets has reduced demand for safe-haven assets such as the yen.

However, expectations of a rate hike by the Bank of Japan (BoJ), reinforced by strong Producer Price Index (PPI) data, could limit aggressive yen selling.

Despite this, the Bank of England's (BoE) gloomy outlook may also cap further GBP/JPY gains. Last week, the BoE lowered its 2025 GDP growth forecast from 1.5% to 0.75%, with Governor Andrew Bailey reiterating the likelihood of further rate cuts this year.

To confirm a trend reversal from bearish to bullish, GBP/JPY needs sustained buying pressure above 193.00. However, as daily chart oscillators have yet to enter positive territory, further upside potential remains limited for now.