• GBP/JPY languishes above the weekly trough amid mixed fundamental cues.
• The JPY benefits from geopolitical risks, though weaker Tokyo CPI cap gains.
• Bets that the BoE will hold rates near a 16-year high help limit the downside.

The GBP/JPY cross remains on the defensive for the fourth successive day on Friday, albeit lacks follow-through selling and remains confined in the previous day's broader trading range through the first half of the European session. Spot prices currently trade just above mid-187.00s and remain well within the striking distance of the weekly low touched on Wednesday.

Investors remain worried that the Israeli-Hamas war could trigger a broader conflict in the Middle East as multiple nations and armed groups continue targeting each other’s territories. This, along with the uncertain global economic outlook, offset the latest optimism led by the announcement of additional monetary stimulus by the People's Bank of China (PBoC) and temper investors' appetite for riskier assets. This is evident from a generally weaker tone around the equity markets, which is seen benefitting the Japanese Yen's (JPY) relative safe-haven status and acting as a headwind for the GBP/JPY cross.

Apart from this, the Bank of Japan's (BoJ) hawkish tilt on Tuesday, suggesting that conditions for phasing out huge stimulus and pulling short-term interest rates out of negative territory were falling into place, lend additional support to the JPY. That said, weaker Japanese data, showing that the core Consumer Price Index (CPI) in Tokyo fell below the BoJ's 2% target for the first time in nearly two years, caps gains for the JPY. Furthermore, a strong start to the year by the UK economy gives the Bank of England (BoE) a reason to hold interest rates next week and contributes to limiting the downside for the GBP/JPY cross.

Hence, it will be prudent to wait for strong follow-through selling before positioning for an extension of the recent pullback from the vicinity of the 189.00 round figure, or a near two-month peak retested earlier this week. Nevertheless, the GBP/JPY cross remains on track to end in the red for the first time in the previous four weeks as the market focus now shifts to the crucial BoE monetary policy meeting on February 1.