GBP/JPY continues to pivot either side of 163.00 level as 21DMA offers resistance, BoE meeting in focus

• GBP/JPY continues to trade in a stable fashion and pivot either side of the 163.00 level.
• The pair is in wait-and-see mode ahead of this week’s pivotal BoE meeting on Thursday.
• For now, the 21DMA at around 163.50 is offering strong resistance.

GBP/JPY continues to trade in a stable fashion and pivot either side of the 163.00 level, as has been the case since the start of the week, as traders keep their powder dry ahead of key risk events later this week. At current levels in the 162.60 area, GBP/JPY is trading flat on the day and a tad in the red on the week, with the 21-Day Moving Average just above 163.50 continuing to act as a ceiling, as has been the case since last Thursday.

The BoE will be announcing policy on Thursday, with a 25 bps rate hike expected by analysts. Given continued insistence from the BoJ that it remains premature to discuss moving away from their ultra-dovish policy stance just yet, Thursday’s rate hike from the BoE will mark a further divergence in the monetary policy stance of the two banks.

Whilst some might argue this supports GBP/JPY upside, the BoE’s guidance on the outlook for future rate hikes and tone on the economy will likely be more important than the expected rate hike itself. The BoE has been sounding more dovish on the economy in recent weeks as the UK struggles through its worst cost-of-living crunch in decades and, with recent data showing the punishing impact that this is having on consumption and consumer sentiment, the BoE may well soften its tone on the need for further rate hikes.

GBP/JPY traders will also be watching how trends in broader risk appetite evolve over the course of the week with Fed tightening and US jobs data also in focus. Sentiment in the global equity space, to which GBP/JPY is typically quite sensitive, remains ropey and any further downturn could push the pair back towards last week’s sub-160.00 lows and towards its 50DMA at 159.37.