GBP/JPY pares intraday gains to weekly high, still well bid around 157.00 mark

The GBP/JPY cross retreated a few pips from the weekly high touched during the first half of the European and was last seen trading just below the 157.00 mark.

Following the overnight decline, the GBP/JPY cross caught fresh bids on the last day of the week and is now looking to build on this week's goodish rebound from the 155.30 region. Hopes for a diplomatic solution to the Ukraine crisis led to a recovery in the global risk sentiment and undermined the safe-haven Japanese yen. On the other hand, upbeat UK macro data acted as a tailwind for the British pound and provide an additional boost to the cross.

The UK Office for National Statistics reported this Friday that domestic Retail Sales recorded a strong 1.9% MoM growth in January. This marked a solid rebound from the 0.4% fall in the previous month and was also better than expectations for the 1.0% increase. Adding to this, the core sales (excluding fuel) surpassed estimates and rose 1.7% during the reported month.

Against the backdrop of this week's stronger UK wage growth data and hotter UK inflation figures, the data lifted expectations for additional rate increases by the Bank of England. In fact, the markets have been pricing in the possibility of a 50 bps rate hike in the March MPC meeting. This, in turn, inspired the GBP bulls and pushed the GBP/JPY cross to the 157.25-157.30 area.

That said, the lack of progress in talks to resolve the problems with the Northern Ireland protocol of the Brexit agreement held back traders from placing aggressive bullish bets around the GBP/JPY cross. Hence, it will be prudent to wait for some follow-through buying before positioning for a further appreciating move towards the 158.00 mark, or YTD high touched earlier this month.

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