GBP/JPY appreciates further, approaching long-term highs at 156.05

• GBP/JPY's rally extends to fresh five-month highs at 155.70.
• The pound remains bid on BoE hike expectations.
• GBP/JPY could reach 159.80 – Credit Suisse.

The British pound has appreciated for the sixth consecutive day on Thursday, breaching the 155.00 level to approach three-year highs right above 156.00. The remains bid against an ailing Japanese yen on Thursday, after having gained nearly 4% so far in October.  

BoE rate hike expectations are supporting the GBP rally

The sterling remains trading on a firm tone, with the investors pricing an interest rate hike by the Bank of England early next year. Surging energy prices have pushed yearly inflation to levels almost twice the BoE’s target for price stability in the UK, and some Bank officials are starting to suggest the possibility of accelerating the monetary policy normalization plan.

Furthermore, a somewhat higher appetite for risk on Thursday has weighed safe assets, like the Japanese yen, favoring riskier currencies such as the GBP. The world’s major stock markets are posting substantial advances, with the US indexes trading well above 1% at the time of writing.

The Dow Jones trades 1.49% up, while the S&P and Dow Jones Indexes advance 1.62% and 1.68% respectively with upbeat quarterly results offsetting concerns about inflationary pressures and supply chain bottlenecks thwarting the economic recovery.

GBP/JPY might extend its rally towards 159.80 – Credit Suisse

From a technical point of view, the pair seems ready to extend its rally to levels near 160.00, according to the FX analysis team at Credit Suisse: “With a major base already seen established in February 2021, we look for a break above 156.62 to further reinforce the positive outlook, with resistance seen next at 159.80.”

Technical levels to watch