- GBP/JPY staged a historic rally on Tuesday, breaking through resistance at 158.00 to hit more than five-year highs above 160.00.
- That marked a 1.9% gain, the best rally for the day since November 2020.
- Tuesday’s bullish momentum sees the pair’s gains for the month now stand at almost 4.0% as rising stocks/yields hurt the yen.
The GBP/JPY saw a historic rally on Tuesday, clearing a key long-term resistance area around 158.00 to trade above 160.00 for the first time since June 2016. That marked a 1.9% gain, the best daily rally since November 2020, the day Pfizer announced the successful results of the Covid-19 vaccine trial. Tuesday’s bullish momentum brings the pair’s gains for the month to almost 4.0% and means that the GBP, at least against the Japanese yen, is back to its pre-Brexit levels.
A continued improvement in risk appetite in global equities, coupled with a historic run higher in US and global bond yields as the Fed pivots aggressively, has had disastrous effects for the yen, which has rallied. been affected across the board, including against the pound sterling. But GBP/JPY’s gains for the month are not as strong as some of its G10 peers like AUD/JPY and NZD/JPY as 1) GBP is more exposed to economic weakness as a result of the war of Ukraine and 2) GBP is still being helped by last week’s dovish BoE policy announcement.
Looking ahead, the cross may extend its rally and if the recent rally in global equities and yields slows/reverses, the pair is likely to experience some profit taking. The previous top of 158.00 for 2021 and the start of 2022 may now have become a bottom, and any pullback to this area is likely to be seen as a good buying opportunity assuming market conditions remain unfavorable to appetite for risk/yield sensitive yen. Turning to the economic calendar, it will be worth watching UK Retail Sales and Consumer Price Inflation data for February and preliminary PMI data for March, as well as comments from various BoE policymakers throughout the session. week.
Source: Fx Street
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