GBP/JPY renews one-month high below 165.00 despite upbeat Japan inflation, sluggish yields

• GBP/JPY picks up bids to refresh one-month high during three-day winning streak.
• March Inflation data from Japan came in better than expected but eased from prior levels.
• Yields portray market’s cautious mood ahead of top-tier inflation numbers from the US, UK.
• Final readings of UK Q4 GDP, risk catalysts are important for fresh impulse.

GBP/JPY bulls attack the previous monthly high, picking up bids around 164.80 to refresh the multi-day top, even as Japan inflation numbers crossed the downbeat expectations during early Friday. It’s worth noting that upbeat sentiment could be held responsible for the cross-currency pair’s latest run-up although the yields remain sluggish.

Tokyo Consumer Price Index (CPI) rose to 3.3% in March versus 2.7% expected but eased from 3.4% prior while the Tokyo CPI ex Food, Energy jumped to 3.4% compared to 3.2% previous readings and 3.3% market consensus. Further, Japan’s Industrial Production growth rallied to 4.5% MoM in February compared to 2.7% estimations and -5.3% prior while Retail Trade also improved during the stated month to 6.6% from 5.0% prior and 5.8% analysts’ forecasts. On the contrary, a surprise jump in Japan’s Unemployment rate, from 2.4% to 2.6% in February, can be cited for the Japanese Yen’s (JPY) latest weakness.

On the other hand, UK Prime Minister Rishi Sunak hails a a £1.8billion Brexit boost as Britain signed up to the giant Trans-Pacific Partnership, per The Sun. The news also mentioned, “The deal, which follows two years of talks, opens the door to free trade with 11 nations including Japan, Australia, Mexico, Malaysia and Singapore.”

Above all, Bank of Japan (BoJ) policymakers’ defense of the easy money status contrasts with the hawkish rhetoric among the Bank of England (BoE) officials to propel the GBP/JPY prices. On the same line could be the recently easing market fears from the banking turmoil and hopes of less severe rate hikes from the key central banks.

Amid these plays, the US 10-year Treasury bond yields remain pressured near 3.55% while the two-year counterpart grinds higher around 4.12%, targeting the first weekly gain in four. Further, Wall Street closed positive for the third consecutive day whereas S&P 500 Futures also print mild gains at the latest.

Looking ahead, the final reading of the UK’s fourth quarter (Q4) Gross Domestic Product (GDP) will be important to watch for the intraday move. However, major attention should be given to the headlines surrounding the inflation data from Eurozone and the US, as well as the central bankers’ reaction to the same.

Technical analysis

A downward-sloping resistance line from December 13, 2022, near 164.80 by the press time, challenges immediate GBP/JPY upside.