The GBP/JPY pair continues to build on the bullish momentum that emerged after breaking out of a nearly three-week trading range and is extending gains for a third consecutive day on Tuesday. Spot prices have reached a new high not seen since August 2008, with buyers attempting to secure a foothold above the 214.00 level amid broad-based weakness in the Japanese yen.

Additional support for the pound comes from Japan's domestic political backdrop. Reports suggesting that Prime Minister Sanae Takaichi may soon call a snap election have boosted expectations of a potential expansion in fiscal stimulus. This development coincides with persistent uncertainty over the timing of the Bank of Japan's next interest rate hike, as well as escalating diplomatic tensions between Tokyo and Beijing, all of which continue to weigh on the yen.

Moreover, the ongoing positive sentiment across global equity markets is reducing demand for safe-haven assets and undermining the yen's status as a refuge currency, further supporting gains in the GBP/JPY pair. That said, bearish sentiment toward the yen remains somewhat capped by expectations of potential intervention by Japanese authorities to stabilize the national currency.

On Tuesday, Japan's Finance Minister Satsuki Katayama stated that she shares concerns over the yen's recent sharp depreciation, noting that she discussed the issue with U.S. Treasury Secretary Scott Bessent. She emphasized that tolerance for excessive weakness in the national currency has its limits. However, the Bank of Japan's cautious stance continues to reinforce the prevailing yen-selling trend, paving the way for a potential extension of the pair's advance.

Meanwhile, the British pound is receiving additional support from a lack of pronounced demand for the U.S. dollar, which further strengthens the positive short-term outlook for the pair.

A sustained break above the previous multi-year high near 212.15, reached last week, confirms the bullish scenario. From a technical perspective, the daily Relative Strength Index (RSI) is in overbought territory, suggesting that buyers should exercise caution, as a period of consolidation cannot be ruled out.

Traders' attention is now likely to turn to the upcoming release of UK GDP data, scheduled for Thursday. News flow from both the UK and Japan may provide fresh directional cues for the pair, particularly against the backdrop of expectations for two potential interest rate cuts by the Bank of England in 2026.