GBP/JPY consolidates near six-year highs at 165.00

• GBP/JPY has spent most of Monday’s quiet trading session near six-year highs around the 165.00 level.
• The pair trades more than 9.0% above March lows, with gains driven by BoE/BoJ policy divergence.
• The next key support area is not until the 175.00 area, 6.0% higher than current levels.

The GBP/JPY has spent most of Monday’s quiet trading session near more than six-year highs around the 165.00 level, with comments from Japan’s Finance Minister and BoJ Governor during the Asian session supporting the yen. Neither gave the market much to go on regarding possible policy intervention to strengthen the yen, suggesting that GBP/JPY’s recent rally of over 9.0% from March lows may still have legs to build on. function.

Indeed, while the BoE is increasingly concerned about weak UK growth as a result of cost of living contraction, it still intends to raise interest rates in the coming months. Meanwhile, BoJ Governor Haruhiko Kuroda said on Monday it was premature to discuss an exit from the BoJ’s flagship negative interest rate and yield curve control policies. This widening of the policy spread, which is mainly due to much higher inflation in the UK versus Japan, has been a key driver of the yen’s recent weakness along with a sharp rise in global government bond yields ( excluding Japan).

When proper British pound flows return to the market on Tuesday, GBP/JPY bulls will look to extend recent gains and proper momentum towards 165.00. Alarming for yen bulls, GBP/JPY’s next key resistance area is not until around the 175.00 area, a rally of over 6.0% from current levels. As for the main events on this week’s calendar, eyes will be on the IMF meetings taking place throughout the week, comments from BoE Governor Andrew Bailey on Thursday and Friday, and the results of UK April PMI survey on Friday.

Technical levels