GBP/JPY struggles to defend 160.00 as firmer yen probes bulls at six-year high

• GBP/JPY bulls take a breather around the highest levels since May 2016, rebound from intraday low of late.
• Upbeat JGB, hawkish BOJ comments and Ukraine-led risk aversion renew JPY strength.
• UK Retail Sales, risk catalysts are in focus for fresh impetus.

GBP/JPY pares intraday losses around the multi-day high as traders in London await Friday’s bell. That said, the yen cross reversed from the six-year high earlier in the day, down 0.37% around 160.75 by the press time, before bouncing off the daily low afterward.

Even so, fears of Japanese policymakers’ market intervention and cautious mood ahead of the UK Retail Sales for February, expected to ease to 7.8% YoY, from 9.1%, seem to keep intraday sellers of GBP/JPY hopeful.

Yields on the Japanese Government Bonds (JGBs) rallied to the levels where the Bank of Japan (BOJ) activated bond buying the previous time in 2015. Also fueling the JGB yields were upbeat inflation data from Japan, per Tokyo Consumer Price Index for March. “The yield on the 10-year Japanese government bond (JGB) rose to 0.235% on Friday, exceeding the level at which the Bank of Japan offered to buy an unlimited amount of JGBs at 0.25% on Feb. 10,” said Reuters.

Additionally, BOJ Governor Haruhiko Kuroda also favored expectations of a further increase in the inflation levels, which in turn helped the JPY to extend gains. It should be observed that sluggish markets and indecision over the Ukraine-Russia stand-off also contribute towards the yen’s strength.

The Western push to take collective measures to stop the Russian invasion of Ukraine weighs on the market sentiment and underpins the JPY’s safe-haven demand. However, the divide among the Eurozone members restricts the likely risk-off mood. On the same line are hopes that the latest compulsion on Russia may result in positive progress in the peace talks.

Against this backdrop, stock futures and yields remain indecisive ahead of the UK data and Eurogroup meetings, which in turn highlights risk catalysts as an extra directive.

Technical analysis

Unless crossing the mid-2016 peak surrounding 163.90, GBP/JPY remains vulnerable to revisit the late 2021 high near 158.20. During the fall, the 160.00 round figure may act as an intermediate halt.