GBP/JPY surges to three-month highs at 154.50 area

• The sterling accelerates past 153.35 to hit multi-month highs at 154.50.
• The pound rallies on BoE hike expectations.
• GBP/JPY is now approaching long-term highs at 156.05.

The British pound is trading higher against most of the major currencies on Friday, and especially against the Japanese yen. The pair has appreciated more than 1.5% over the last two days, reaching prices near 154.50 for the first time since late June.

BoE rate hike expectations boost the pound

The sterling has been appreciating over the last sessions, fuelled by higher expectations that the bank of England will be the first major central bank to start hiking interest rates following the COVID-19 crisis.

Surging energy prices have boosted yearly inflation to 3.2% in September, well beyond the Bank of England’s 2% target for price stability. This has forces some BoE officials to openly suggest the possibility of accelerating rate hikes, which has increased GBP’s attractiveness for investors.

On the other end, the Japanese yen, particularly sensitive to monetary policy differentials is suffering against the GBP and the USD. With the Bank of Japan discarding the possibility of any rate hike for the foreseeable future, and with the yield curve under control, the JPY remains vulnerable against monetary tightening expectations in the rest of the world’s major economies.

GBP/JPY: Approaching long-term highs at 156.00

The pair has accelerated after breaching the resistance area at 153.35/45 to advance towards the mid-range of 154.00 reaching overbought levels in hourly charts, which could anticipate some correction. If the sterling remains above the mentioned 153/35/45, the near-term bullish bias might push the pair to test 155.15 (June 23 high) before 155.45 (June 15 high) and 156.05 (May 27 high).

On the downside, below 155.35 (July 30, August 10, and 11 lows) the pair might seek support at 152.50/60 (September 14 and 28 highs) and 150.80 (October 6 low).