- GBP/JPY gains positive traction and is supported by a combination of factors.
- A positive risk tone undermines the JPY and acts as a tailwind for spot prices.
- Bulls seem unaffected by the prospects of BoE rate interest rate cuts in 2024.
The GBP/JPY cross attracts some dip-buyers near the 186.15 area, or the weekly low touched this Wednesday and builds on the momentum through the first half of the European session. Spot prices climb to a fresh daily high in the last hour, with bulls now looking to extend the positive move beyond the 200-hour Simple Moving Average (SMA) and the 187.00 round-figure mark.
The prospect of an Israel-Hamas ceasefire raises hopes for a de-escalation of the crisis in the Middle East and boosts investors’ confidence. This is seen as a key factor behind the safe-haven Japanese Yen’s (JPY) relative underperformance. The British Pound (GBP), on the other hand, benefits from the ongoing US Dollar (USD) pullback from its highest level in almost three months. This, in turn, assists the GBP/JPY cross to gain some positive traction and rebound over 85 pips from the daily trough.
The GBP bulls, meanwhile, seem rather unaffected by the rising prospect of the Bank of England (BoE) reducing interest rates in 2024. In fact, BoE’s chief economist Huw Pill said on Tuesday that the interest rate could drop this year as a reward to the economy for bringing down inflation. This comes on top of BoE Gornover Andrew Bailey’s remarks last week, saying that things are heading in the right direction and that the current level of bank interest rate remains appropriate.
Bailey, however, signalled that the central bank was ready to start easing policy. Adding to this, BoE Deputy Governor Sarah Breeden said on Wednesday that she is less concerned that the bank rate might need to be tightened further and that her focus has shifted to how long rates need to remain at their current level. This, however, does little to cap the GBP/JPY cross, though the Bank of Japan’s (BoJ) hawkish tilt earlier this month might hold back bulls from placing fresh bets.