- GBP/JPY was seen consolidating the previous day’s strong positive move to multi-year tops.
- The upbeat UK economic outlook, BoE Vlieghe’s hawkish comments underpinned the GBP.
- The risk-on mood weighed on the safe-haven JPY and supports prospects for further gains.
The GBP/JPY cross remained confined in a narrow trading band below the 156.00 mark and consolidated the previous day's strong gains to the highest level since February 2018.
The British pound got a strong lift on Thursday after the Bank of England policymaker Gertjan Vlieghe said that the central bank was likely to raise rates well into next year. Vlieghe also noted that an increase could come earlier if there is a smooth transition from furlough and the economy rebounds more quickly than expected.
The comes on the back of the optimistic outlook for the UK economic recovery from the pandemic amid the impressive pace of vaccinations and the gradual easing of lockdown measures. In fact, UK Prime Minister Boris Johnson said that there is nothing in the data currently to delay the plan to end restrictions fully on June 21.
This, in turn, continued acting as a tailwind for the British pound. Apart from this, the prevalent risk-on environment undermined the safe-haven Japanese yen. The already upbeat market mood got an additional boost after the New York Times reported that US President Joe Biden will announce a $6 trillion budget for the fiscal year 2022.
Despite the supporting factors, overbought conditions on short-term charts held bullish from placing fresh bets and kept a lid on any further gains for the GBP/JPY cross. That said, the fundamental backdrop suggests that the path of least resistance remains up and supports prospects for an extension of a one-month-old bullish trajectory.
Technical levels to watch
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