GBP/JPY climbs to two-week high, closer to mid-155.00s ahead of BoE announcement

• A combination of factors assisted GBP/JPY to attract some dip-buying near the 155.00 mark.
• BoE rate hike bets continued underpinning the British pound and helped limit the early slide.
• Resurgent USD demand weighed on the JPY and remained supportive of the BoE event risk.

The GBP/JPY cross reversed an intraday dip and climbed to a two-week high, around the 155.40 region during the early European session.

The cross attracted some dip-buying near the key 155.00 psychological mark on Thursday and has now moved into the positive territory for the fourth successive day. Bulls might now be looking to build on the recent strong rebound from sub-153.00 levels, or support marked by the very important 200-day SMA.

The British pound continued drawing support from expectations that the Bank of England will hike interest rate at its meeting later today. On the other hand, the Japanese yen was weighed down by resurgent US dollar demand. This, in turn, extended some support to the GBP/JPY cross and helped limit the early slide.

Investors, however, might refrain from placing aggressive bets and prefer to wait on the sidelines ahead of the BoE event risk. The UK central bank is widely expected to announce the first back-to-back interest rate hikes since 2004 and signal its approach to start unwinding the £895 billion quantitative easing programme.

The announcement will play a key role in influencing the British pound and provide some impetus to the GBP/JPY cross. Apart from this, the ECB policy decision might infuse some volatility in the markets and drive demand for the safe-haven JPY. This might further allow traders to grab some short-term opportunities around the cross.

Technical levels to watch