- GBP/JPY gained strong follow-through traction amid some renewed buying around the GBP.
- The risk-on mood undermined the safe-haven JPY and remained supportive of the momentum.
- Slightly overstretched conditions might cap gains ahead of the BoE monetary policy decision.
A sudden pickup in the British pound pushed the GBP/JPY cross to fresh multi-year tops, closer to mid-152.00s during the early European session.
The cross built on the previous day’s positive move and gained some strong follow-through traction for the second consecutive session on Thursday. The momentum was exclusively sponsored by the emergence of some fresh buying around the sterling, which was being supported by the post-FOMC US dollar sell-off.
Apart from this, the underlying bullish tone in the financial markets undermined the Japanese yen’s relative safe-haven status and further boosted the GBP/JPY cross. The optimistic global economic outlook and the Fed’s ultra-dovish stance remained supportive of the prevalent risk-on mood.
Apart from this, the positive move lacked any obvious catalyst and is likely to remain capped as investors might refrain from placing aggressive bets ahead of the key central bank event risks. The Bank of England is scheduled to announce its monetary policy decision later this Wednesday.
The BoE is not expected to make any changes in interest rates or the pace of stimulus. Moreover, the announcement will not be accompanied by new economic projections or post-meeting press conference. Hence, investors will keep a close eye on the BoE’s assessment of the current state of the economy.
Traders will then shift their focus to the Bank of Japan meeting on Friday, which again is unlikely to prove to be a major market-moving event. This, in turn, suggests that the path of least resistance for the GBP/JPY cross in on the upside, though overbought conditions warrant some caution.
Technical levels to watch
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