GBP/JPY bounces after a pullback to near 166.40 ahead of BOE’s Bailey

• GBP/JPY has rebounded from 166.43 as investors are gung-ho on a minor correction.
• A higher UK inflation print has bolstered the expectations of one more rate hike by the BOE.
• Sheer weakness in the Japanese yen may hurt the economy more than its attached benefits.

The GBP/JPY pair is displaying a modest bounce in early Tokyo after a correction to near 166.43 on Wednesday. The cross lost strength after hitting a multi-year high of 168.43 amid broader weakness in the Japanese yen.

The pound bulls are performing strongly against yen from a longer-term perspective led by higher expectations of a tight policy stance by the Bank of England (BOE) in May. A significant jump in the UK’s inflation has bolstered the odds of one more rate hike by the BOE in May. The UK’s yearly Consumer Price Index (CPI) landed at 7%, which may elevate the interest rates from their current levels at 0.75%. In today’s session, pound bulls may remain on the sidelines as investors are awaiting the speech from BOE Governor Andrew Bailey. The speech is likely to be the last appearance from BOE’s Bailey till the announcement of the interest rate decision in May. Therefore, it will have a significant impact on the sterling.

Meanwhile, the Japanese yen is resisting further downside after the verbal intervention from the Japanese Finance Minister Shunichi Suzuki. He warned that the impact of a weaker yen could be more on the Japanese economy than its benefits to the exporters. However, the Bank of Japan (BOJ) is still keeping a dovish tone and citing the threats of sheer decline in yen.