GBP/JPY senses barricades around 160.50, bulls still hopeful on positive market mood

• GBP/JPY has faced selling pressure around 160.50 as profit-booking kicks in.
• The BOE is expected to announce a bumper rate hike in its June monetary policy.
• The price rise should be accompanied by a wage hike to stable inflation.

The GBP/JPY pair has witnessed some offers after failing to sustain above the critical resistance of 160.50. The odds of upside seem lucrative amid a firmer rebound in the positive market sentiment.  The risk-on impulse is underpinning the risk-sensitive assets and the pound bulls are enjoying liquidity at the cost of the yen bulls.

Rising Inflation in the UK area is the major catalyst, which is worrying the pound bulls.  The Bank of England (BOE) is deploying the majority of its quantitative measures to control the soaring inflation. However, fixing a whopping figure of 9% inflation is not a cakewalk and it will take sufficient time to get cornered.

It is worth noting that the BOE raised its interest rate by 25 basis points (bps) in the first week of May. Officially, the benchmark rate in the UK stands at 1%. As per the market consensus, the BOE could feature a jumbo rate hike in its June monetary policy. Considering the galloping inflationary pressures, a rate hike announcement by 50 bps seems highly required.

Meanwhile, the Japanese yen is worried over grounded inflation in its region. The Statistics Bureau of Japan has reported the Tokyo Consumer Price Index (CPI) at 2.4%, lower than the estimates of 2.7% and the prior print of 2.5%. Japan’s Prime Minister Fumio Kishida stated on Wednesday that the Bank of Japan (BOJ) should make some efforts to achieve the targeted inflation rate of 2%. And BOJ Governor Harihuko Kuroda believes that the dual combo of price rise and wage hike could stable the inflation at desired levels.