The GBP/JPY cross extends the previous day's late pullback from the weekly peak – levels just above the 188.00 mark – and attracts some follow-through sellers on Thursday. Spot prices, however, recovered over 100 pips from the daily low and traded just above the mid-185.00s during the early part of the European session.

The Bank of Japan’s (BoJ) summary of opinions from the July policy meeting indicated that some members see room for further rate hikes and policy normalization. This, along with a generally weaker risk tone, underpins the safe-haven Japanese Yen (JPY) and exerts some downward pressure on the GBP/JPY cross. The market sentiment remains fragile in the wake of concerns about an economic downturn in the US and China – the world's two largest economies – and escalating geopolitical tensions in the Middle East.

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The British Pound (GBP), on the other hand, benefits from the emergence of some selling around the US Dollar (USD). This, in turn, assists the GBP/JPY cross to attract some dip-buying near the 184.45 region. Any meaningful upside, however, still seems elusive in the wake of the ongoing riots in the UK and dovish Bank of England (BoE) expectations. The BoE lowered rates for the first time in more than four years, from a 16-year high to 5.0% last Thursday, while traders are pricing in the possibility of two more cuts by the year-end. 

Meanwhile, BoJ Deputy Governor Shinichi Uchida downplayed the chances of a near-term rate hike on Wednesday. That said, BoJ Governor Kazuo Ueda's hawkish comments last week keep the door open for further policy tightening by the central bank. This, in turn, makes it prudent to wait for strong follow-through buying before confirming that the GBP/JPY cross has formed a near-term bottom and positioning for an extension of this week's bounce from the vicinity of the 180.00 psychological mark, or over a seven-month low.

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