- GBP/JPY regained traction on Wednesday and was supported by a combination of factors.
- Dovish comments from BoJ Kuroda and risk-on momentum weighed on safe haven JPY.
- Hot UK consumer inflation figures supported the British pound and provided an additional boost.
The crossing GBP/JPY it maintained its strong bid tone through the middle of the European session and was last seen trading near a two-and-a-half-week high around 164.00.
Following a modest pullback the previous day, the GBP/JPY cross picked up fresh offers on Wednesday and was supported by a combination of factors. The Japanese yen weakened across the board after Bank of Japan Governor Haruhiko Kuroda reiterated that the current powerful monetary easing must be maintained to support the economic recovery. Aside from this, risk-on momentum, as evidenced by a positive tone in equity markets, undermined traditional safe-haven assets, including the JPY.
On the other hand, the British pound got some support from higher-than-expected UK consumer inflation figures. In fact, the UK Office for National Statistics reported that the headline CPI jumped from 6.2% year-on-year in the previous month to 7% in March, the highest level since 1992. Furthermore, the core CPI, which excludes volatile prices of food and energy, rose to 5.7% YoY from 5.2% reported in February. This was seen as another factor that provided additional momentum to the GBP/JPY cross.
With the latest rally, spot prices are up almost 150 pips from the weekly low, around the 161.60 region reached on Monday. Expectations that the BoJ will stick to its accommodative monetary policy should continue to act as a headwind for the JPY and support prospects for a further near-term appreciation move for the GBP/JPY cross. Therefore, a further move back to challenge the multi-year high, around the 164.65 region touched in March, remains a distinct possibility.
Technical levels
Source: Fx Street
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