- A combination of factors pushed GBP / JPY to new multi-year highs on Tuesday.
- Recent aggressive signals from the Bank of England continued to prop up the British pound.
- The risk appetite mood undermined the safe haven JPY and contributed to the rally.
The crossing GBP/JPY added to its intraday gains and shot to the highest level since June 2016, around the 157.60 region during the first half of the European session.
Following the consolidation price movements of the previous day, the GBP / JPY cross caught new offers on Tuesday and resumed its strong bullish momentum seen since the beginning of this month. This marked the ninth day of a positive move in the previous ten and was supported by a combination of factors.
The British pound was based on recent aggressive comments from Bank of England officials, signaling an imminent rise in interest rates later this year. Indeed, Bank of England Governor Andrew Bailey said the UK central bank will have to act amid mounting risks to medium-term inflation expectations.
This is due to a positive evolution of Brexit, which continued to act as a tailwind for the British pound and provided a strong boost to the GBP / JPY cross. It is worth remembering that the European Union agreed to remove most controls on goods arriving in Northern Ireland from the rest of the UK.
On the other hand, underlying bullish sentiment in financial markets undermined the relative safe-haven status of the Japanese yen. This was seen as another factor contributing to the GBP / JPY’s bullish trajectory, leading to some trading stops located near the 157.35-40 area.
In the absence of major economic releases to move the market, the GBP / JPY appears poised to extend its appreciation move. However, the extreme overbought conditions on the short-term charts warrant some caution for bull traders ahead of the latest UK consumer inflation figures on Wednesday.