GBP/JPY surges to fresh multi-year tops, further beyond mid-157.00s

• A combination of factors pushed GBP/JPY to fresh multi-year tops on Tuesday.
• The recent hawkish signals from BoE continued underpinning the British pound.
• The risk-on mood undermined the safe-haven JPY and contributed to the rally.

The GBP/JPY cross added to its intraday gains and shot to the highest level since June 2016, around the 157.60 region during the first half of the European session.

Following the previous day's consolidative price moves, the GBP/JPY cross caught fresh bids on Tuesday and resumed its strong bullish momentum witnessed since the beginning of this month. This marked the ninth day of a positive move in the previous ten and was supported by a combination of factors.

The British pound was underpinned by the recent hawkish remarks from the Bank of England officials, signalling an imminent interest rate hike later this year. In fact, the BoE Governor Andrew Bailey said that the UK central bank will have to act amid increasing risks to medium-term inflation expectations.

This comes on the back of a positive Brexit development, which continued acting as a tailwind for the sterling and provided a strong lift to the GBP/JPY cross. It is worth recalling that the European Union agreed to scrap most checks on goods arriving into Northern Ireland from the rest of the UK.

On the other hand, the underlying bullish sentiment in the financial markets undermined the Japanese yen's relative safe-haven status. This was seen as another factor that contributed to the GBP/JPY pair's bullish trajectory, taking along some trading stops placed near the 157.35-40 area.

In the absence of any major market-moving economic releases, the GBP/JPY cross seems all set to extend its appreciating move. However, extremely overbought conditions on short-term charts warrant some caution for bullish traders ahead of the latest UK consumer inflation figures on Wednesday.

Technical levels to watch