GBP/JPY sticks to strong gains near two-and-half-week high, around 164.00 mark

• GBP/JPY regained traction on Wednesday and was supported by a combination of factors.
• Dovish remarks by BoJ’s Kuroda and the risk-on impulse weighed on the safe-haven JPY.
• Hot UK consumer inflation figures underpinned sterling and provided an additional boost.

The GBP/JPY cross maintained its strong bid tone through the first half of the European session and was last seen trading near a two-and-half-week high, around the 164.00 mark.

Following the previous day's modest pullback, the GBP/JPY cross caught fresh bids on Wednesday and was supported by a combination of factors. The Japanese yen weakened across the board after the Bank of Japan Governor Haruhiko Kuroda reiterated to sustain the current powerful monetary easing to support economic recovery. Apart from this, the risk-on impulse - as depicted by a positive tone around the equity markets - undermined traditional safe-haven assets, including the JPY.

On the other hand, the British pound drew some support from hotter-than-expected UK consumer inflation figures. In fact, the UK Office for National Statistics reported that headline CPI jumped from 6.2% YoY in the previous month to 7% in March - the highest level since 1992. Adding to this, the Core CPI, which excludes volatile food and energy prices, rose to 5.7% YoY from the 5.2% reported in February. This was seen as another factor that provided an additional lift to the GBP/JPY cross.

With the latest leg up, spot prices have rallied nearly 150 pips from the weekly low, around the 161.60 region touched on Monday. Expectations that the BoJ will stick to its accommodative monetary policy stance should continue to act as a headwind for the JPY and supports prospects for a further near-term appreciating move for the GBP/JPY cross. Hence, a subsequent move back towards challenging the multi-year high, around the 164.65 region touched in March, remains a distinct possibility.

Technical levels to watch