GBP/JPY struggles for a firm intraday direction, stuck in a range above 182.00 ahead of BoE

• GBP/JPY struggles to gain any meaningful traction and remains confined in a range on Thursday.
• Investors opt to wait on the sidelines ahead of the highly anticipated BoE monetary policy decision.
• The divergent BoE-BoJ policy outlook continues to act as a tailwind and helps limit the downside.

The GBP/JPY cross lacks any firm directional bias on Thursday and oscillates in a narrow trading band, just above the 182.00 mark through the Asian session.

Market participants now seem to have moved to the sidelines and prefer to wait for the outcome of the highly-anticipated Bank of England (BoE) policy meeting later today. The UK central bank is widely expected to revert to a smaller 25 bps lift-off in the wake of a sharp deceleration in the headline UK CPI to the 7.9% YoY rate in June from the 8.7% previous. The inflation, however, is still significantly above the BoE's 2% target and keeps hope for another 50 bps jumbo rate hike alive, which is seen acting as a tailwind for the British Pound and the GBP/JPY cross.

The focus, meanwhile, will remain glued to the accompanying monetary policy statement and the post-meeting press conference. Against the backdrop of the recent swings in expectations about the future rate-hike path, the outlook, in turn, will play a key role in determining the next leg of a directional move for the GBP/JPY cross. In the meantime, a slight recovery in the risk sentiment, along with the Bank of Japan's (BoJ) dovish stance, undermines the safe-haven Japanese Yen (JPY) and helps spot prices to stall the overnight pullback from a multi-week peak.

It is worth recalling that BoJ Governor Kazuo Ueda reiterates last week that the central bank won't hesitate to ease policy further and that more time was needed to sustainably achieve the 2% inflation target. Moreover, the minutes from the BoJ policy meeting showed that members agreed to maintain the current easy monetary policy. Furthermore, BoJ Deputy Governor Shinichi Uchida turned down talks of an early end to the negative rate policy and said that Japan is now at a phase where it's important to patiently maintain the ultra-easy policy.

This marks a big divergence in comparison to a relatively hawkish stance adopted by other major central banks, which might continue to weigh on the JPY and suggests that the path of least resistance for the GBP/JPY cross is to the upside. Hence, any slide is more likely to find decent support and remain limited near the 181.00 round-figure mark. The said handle should act as a pivotal point, which if broken might negate the positive outlook and suggest that the recent rally of nearly 700 pips from a six-week low touched last Friday has run out of steam.

Technical levels to watch