GBP/JPY snaps two-day losing streak below 164.00 amid firmer yields, BoE vs. BoJ divergence

GBP/JPY teases buyers while picking up bids to 163.80 during early Thursday, following a two-day downtrend, as firmer yields join monetary policy divergence between the Bank of England (BoE) and the Bank of Japan (BoJ).

The cross-currency pair’s latest rebound could also be linked to the market’s anxiety ahead of the Group of 20 (G20) meeting as the latest headlines from the New York Times (NYT) suggest a possible rift between the US and China at the key event. “China is urging the start of peace talks, and some Group of 20 nations could support that idea when they gather in India, but U.S. officials argue Russia would not negotiate in good faith,” said the news.

Elsewhere, the US 10-year Treasury bond yields rose to the highest levels since early November 2022 by poking the 4.0% mark whereas the two-year counterpart rallied to the June 2007 levels by piercing the 4.90% mark at the latest. The jump in the US Treasury bond yields suggests the market’s fears of inflation and recession, which in turn probed bulls on Wall Street and weigh on S&P 500 Futures of late. It should be noted that the Japanese yen often traces the US Treasury bond yields.

It should be noted that the hawkish comments from BoE Governor Andrew Bailey contrast with those from the BoJ’s board member Junko Nakagawa to offer additional strength to the GBP/JPY recovery. BoE Governor Bailey said on Wednesday that some further increase in bank rates may turn out to be appropriate but added that nothing is decided, as reported by Reuters. On the other hand, BoJ’s Nakagawa said that an easy monetary policy is important for the time being, as it supports the economy.

Talking about the data, February’s Jibun Bank Manufacturing Japan and S&P/CIPS Manufacturing PMI for the UK improved a bit from their initial forecasts but remained below the 50.0 level differentiating the expansion from the otherwise in activities. Recently, Japan’s Capital Spending grew 7.7% during the fourth quarter (Q4) versus 9.8% previous readings and 2.8% market forecasts.

Moving on, updates from the G20 could join central bankers’ comments to entertain the GBP/JPY traders amid a likely sluggish day due to the light calendar.

Technical analysis

Wednesday’s Doji candlestick joins the GBP/JPY pair’s sustained trading above the 200-DMA, around 163.40 by the press time, to underpin the bullish bias for the quote.