GBP/JPY sticks to gains above 156.00 mark amid BoJ-inspired JPY weakness

• GBP/JPY regained positive traction on Friday after the BoJ announced its policy decision.
• A hawkish assessment of the BoE decision undermined sterling and capped the upside.
• Sustained move beyond the 156.70 area is needed to support prospects for further gains.

The GBP/JPY cross retreated a few pips from the daily peak and was last seen trading with modest intraday gains, around the 156.25-156.30 region.

Following the previous day's post-BoE turnaround from a near four-week peak, the GBP/JPY cross caught fresh bids on Friday amid the emergence of fresh selling around the Japanese yen. The Bank of Japan stuck to its accommodative policy stance and downgraded the overall assessment of the economy. In the post-meeting press conference, Governor Haruhiko Kuroda reiterated that the BoJ will ease further without hesitation as needed, which, in turn, undermined the JPY.

That said, the lack of progress in the Russia-Ukraine ceasefire negotiations tempered investors' appetite for perceived riskier assets and acted as a tailwind for the safe-haven JPY. In the latest development, Ukrainian Presidential aide Ihor Zhovkva said that talks with Russia are progressing only slowly. Separately, Russia accused Ukraine of slowing down peace talks and said that it wants to go at a faster pace, though the Ukraine delegation has not shown readiness to speed talks.

Apart from this, a dovish assessment of the Bank of England's decision on Thursday held back bulls from placing aggressive bullish bets around the British pound and capped gains for the GBP/JPY cross. In fact, the BoE raised its key rate for the third successive meeting, though the 25 bps rate hike disappointed some investors anticipated a more aggressive increase. Moreover, the UK central bank also softened its language around the need for future rate hikes.

Nevertheless, the GBP/JPY cross, so far, has managed to hold its neck above the 156.00 round figure and remains on track to post strong weekly gains. Bulls, however, are likely to wait for some follow-through buying beyond the overnight swing high, around the 156.70 region, before placing fresh bets. This will set the stage for an extension of the recent strong appreciating move from sub-151.00 levels, or the YTD low touched earlier this month.

Technical levels to watch