GBP/JPY clings to gains near one-week high, around mid-157.00s amid positive risk tone

• GBP/JPY edged higher for the second successive day and climbed to a one-week high on Wednesday.
• Receding Omicron fears, rising BoE rate hike bets continued acting as a tailwind for the British pound.
• The upbeat market mood undermined the safe-haven JPY and provided an additional lift to the cross.

The GBP/JPY cross maintained its bid tone through the mid-European session and was last seen hovering near a one-week-high, just below mid-157.00s.

The cross gained traction for the second successive day on Wednesday and now seems all set to build on this week's solid rebound from sub-156.00 levels. The British pound continued with its relative outperformance amid hopes that the Omicron outbreak won't derail the UK economy.

This, along with rising bets for additional rate hikes by the Bank of England, acted as a tailwind for the sterling. Apart from this, a generally positive tone around the equity markets undermined the safe-haven Japanese yen and extended additional support to the GBP/JPY cross.

Despite the supporting factors, traders seemed reluctant and preferred to wait on the sidelines ahead of the critical US consumer inflation figures. This makes it prudent to wait for a strong follow-through buying before positioning for any further appreciating move for the GBP/JPY cross.

Nevertheless, the fundamental backdrop seems tilted firmly in favour of bullish traders and supports prospects for an extension of the recent strong move up witnessed since December 20. Hence, a move beyond the 158.00 mark, towards testing 2021 high, remains a distinct possibility.

Technical levels to watch