GBP/JPY drops to 161.50 on sluggish yields, BOJ chatters

• GBP/JPY takes offers to refresh intraday low, down for the second consecutive day.
• Market sentiment improves on mixed US data, China stimulus.
• Cautious optimism of Japan government, challenges for BOJ’s easy money policy seem to underpin JPY strength of late.
• A light calendar keeps risk catalysts in the driver’s seat, Jackson Hole in focus.

GBP/JPY drops for the second consecutive day as bears attack 161.50 during Thursday’s Asian session. The cross-currency pair’s latest weakness could be linked to the sluggish US Treasury yields and risk-positive headlines from China and Japan.

That said, the US 10-year Treasury yields rose the most in a week the previous day while refreshing a two-month high to around 3.10%. However, mixed concerns seem to have probed the US bond sellers of late.

Elsewhere, Bloomberg came out with the news suggesting that China’s Cabinet, State Council, outlined a 19-point policy package on Wednesday while announcing economic stimulus measures worth CNY1 trillion ($146 billion) to stimulate growth affected by covid lockdowns and property market crisis.

On the other hand, the Japanese government’s monthly economic report kept the view that its economy is "moderately picking up" pace while raising the outlook for factory output. Earlier in the day, a Reuters poll mentioned,” If Prime Minister Fumio Kishida finds inflation well above target too painful for households and businesses, he could still put the central bank under pressure.”

It should be noted that the political uncertainty in the UK and chatters that the latest inflation fears could push the Bank of Japan (BOJ) towards higher rates also seem to have exerted downside pressure on the GBP/JPY prices of late. Even so, Bank of Japan (BOJ) board member Nakamura recently stated that BOJ must patiently maintain powerful monetary easing.

Moving on, a light calendar keeps the market’s focus on the Jackson Hole Symposium. Though, headlines from China and Japan, not to forget news over the UK politics and Brexit, may also entertain GBP/JPY traders.

Technical analysis

Unless bouncing back beyond the previous support line from early March, around 163.00 by the press time, GBP/JPY remains on the back foot and can approach the 200-SMA support surrounding 159.00.