Ella 
GBP/JPY has recovered steadily from more than three-week lows hit during the Asian session on Thursday, and has recently climbed above the 203.00 round mark. At present, GBP/JPY has strengthened slightly to around the 203.30-203.35 area, which seems to have interrupted the recent decline to the highest level since August 2008.
Initial market reaction to speculation that Japanese authorities may have intervened in foreign exchange markets to boost the currency quickly faded without concrete evidence of intervention emerging. This, coupled with unsatisfactory Japanese trade balance data and the maintenance of underlying bullish sentiment in global stock markets, weakened the yen and prompted some short covering in the GBP/JPY cross.
Japan’s trade bar swung to a surplus of 224 billion yen, an official report showed, compared with expectations for a deficit of 240 billion yen and a deficit of 1.22 trillion yen the previous month. However, more concrete data showed that Japan’s imports and exports grew less than expected in June as local economic activity remained sluggish and overseas demand also softened. This may force the Bank of Japan (BoJ) to avoid raising interest rates.
On the other hand, sterling (GBP) was supported by reduced market bets on a rate cut by the Bank of England (BOE). British June consumer inflation data released on Wednesday was slightly higher than expected, with monthly inflation at 2%, reducing market bets on a rate cut by the Bank of England. Previously, the UK’s gross domestic product (GDP) grew by 0.4% in May, which was better than expected, which continued to be positive for the pound and further boosted the GBP/JPY cross.
However, it remains to be seen whether bulls can extend the day’s gains amid speculation that Japanese authorities may step in to support the yen. Market participants may also be inclined to wait for the release of UK employment data before making directional bets. Therefore, we need to wait for strong follow-through buying in GBP/JPY to support the prospects of further gains.
