GBP/JPY clings to strong intraday gains above mid-167.00s, highest since April

• GBP/JPY gained traction for the ninth straight day and shot to its highest level since April 21.
• The heavily offered tone surrounding the JPY was seen as a key factor fueling the momentum.
• The UK political turmoil might hold back bulls from placing fresh bets and cap further gains.

The GBP/JPY cross prolonged its recent strong bullish trajectory witnessed over the past two weeks or so and scaled higher for the ninth successive day on Wednesday. The momentum pushed spot prices to the highest level since April 21, around the 167.70 region during the early European session.

The Japanese yen has been the worst performer this year amid a big divergence in the monetary policy stance adopted by the Bank of Japan and other major central banks. It is worth recalling that the BoJ has vowed to keep its existing ultra-loose policy settings and promised to conduct unlimited bond purchase operations to defend its near-zero target for 10-year yields. This, in turn, was seen as a key factor that continued acting as a tailwind for the GBP/JPY cross.

Bulls seemed rather unaffected by an upward revision of Japanese GDP numbers, which showed that the economy contracted by 0.1% during the first quarter as against the Preliminary estimate of -0.2%. Adding to this, the annualized GDP print witnessed a significant improvement from the 1.0% decline reported previously, to a -0.5%. This, however, did little to provide any respite to the domestic currency or hinder the GBP/JPY pair's ongoing strong positive momentum.

With the latest leg up, spot prices have moved well within the striking distance of a multi-year peak touched in April, though the UK political turmoil could cap any further upside. British Prime Minister Boris Johnson survived the no-confidence vote on Monday, albeit at a much smaller margin than expected. Given that many MPs from within the Conservative Party voted against him, the development has raised uncertainty over Johnson’s future as the UK Prime Minister.

Market participants now look forward to the release of the final UK Construction PMI, which might influence the British pound and provide some impetus to the GBP/JPY cross. Apart from this, the broader market risk sentiment should allow traders to grab short-term opportunities.

Technical levels to watch