Ella 
GBP/JPY rose early in the week, but there was a lack of follow-through buying and remained restricted to Friday’s wide trading range. Spot prices in Asia are trading around the 183.00 round figure, close to the 50-day SM and still close to the five-week low hit last Thursday.
The yen continued to perform sluggishly in the face of market expectations that the Bank of Japan will immediately turn to a dovish stance. Coupled with the overall rise in equity markets, this is another factor that weakens the yen’s safe-haven status and is beneficial for GBP/JPY. However, recent comments by Bank of Japan Governor Kazuo Ueda have fueled expectations that the Bank of Japan may end its ultra-loose policy.
In an interview with the Yomiuri newspaper earlier this month, Ueda Kazuo said that if the Bank of Japan is convinced that prices and wages will continue to rise, ending negative interest rates is also an option. On top of this, the reduced likelihood of a more aggressive tightening policy by the Bank of England (BOE) further limits the upside for the GBP/JPY cross. In fact, Bank of England Governor Andrew Bailey told lawmakers that the Bank is now “closer” to ending its streak of rate hikes.
Additionally, renewed recession fears and signs of a cooling British labor market could put pressure on the Bank of England to pause its interest rate hike cycle. Traders also appear reluctant to take large positions ahead of this week’s key data/central bank event risks, preferring to stay on the sidelines. UK consumer inflation data will be released on Wednesday ahead of a key Bank of England monetary policy meeting on Thursday. This will have an impact on GBP and provide a meaningful boost to GBP/JPY.
Market attention will then turn to Friday’s Bank of Japan monetary policy update, which could bring volatility to the pair. This may further help investors determine the next directional move for GBP/JPY. Meanwhile, spot prices appear more likely to be range-bound due to a holiday in Japan and no market-moving economic data from the UK on Monday.
