The GBP was bolstered overnight by a strong signal from the BoJ that we’re nearing the new era of tighter monetary policy. In the words of my colleague Kathleen Books, there was mutiny at the BOE (read her full report here). Two members of the MPC have voted to go against their Governor by voting for a rate hike already. However, soft inflation expectations have put a damper on the pound’s rally.
Nonetheless, the aforementioned pound strength and widespread yen weakness as USDJPY smashed out of its long-term trading range (although we are eying 104.15), helped to push GBPJPY to the bottom of its daily Ichimoku cloud. This comes after the pair rebounded off a key support zone around its 200-day SMA.
Overall, it appears that things may be looking up for GBPJPY in the long-term. Easing geopolitical tensions and weak Japanese economic data are hurting the yen and the GBP is being bolstered by tightening expectations. There are also some strong bullish technical signals. A break of the bottom of its daily Ichimoku cloud could see the pair make a run for 174.00. Yet, it’s looking somewhat overbought in the short-term.
Source: FOREX.com, Bloomberg (note: this chart may not represent the prices offered by FOREX.com)
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