GBP/JPY pullback eyes to retest 161.00 as yields grind higher

• GBP/JPY takes offers to renew intraday low, extends pullback from a three-week high.
• Market sentiment dwindles, yields struggle to extend day-start rally.
• Yen pares early-day losses amid mostly firmer Japan data, anxiety ahead of Biden-Powell meet.
• Brexit, Russia and China are some additional subjects that weigh on prices.

GBP/JPY extends early Asia pullback from a three-week high towards refreshing the daily low as traders in London brace for Tuesday’s bell. That said, the cross-currency pair takes offers around 161.10 by the press time, snapping a two-day uptrend.

The pair refreshed its multi-day high earlier in Asia amid the market’s optimism surrounding concerns over the Fed’s next moves. However, anxiety ahead of the meeting between US President Joe Biden and Fed Chair Jerome Powell joins recently firmer data from Japan to weigh on the GBP/JPY prices.

US President Biden and Fed Chair Powell are up for a meeting on Tuesday and will discuss steps to tame the inflation, while also trimming the balance-sheet debt. This could help anchor the market as the latest concerns remained mostly mixed amid receding bets of the Fed’s aggressive rate hikes and optimism from Shanghai’s unlock.

It’s worth noting that Japan’s Consumer Confidence Index for May rose past 33.9 forecast to 34.1, versus 33.00 prior. Earlier in the day, the Asian major’s Unemployment Rate eased to 2.5% in April versus 2.6% expected and prior whereas the Retail Trade also rose to 2.9% YoY during the stated month, from 2.6% expected and revised down 0.7% prior. However, the preliminary reading of Industrial Production disappoints with -4.8% YoY figure compared to -2.5% market consensus and -1.7% previous readouts.

Elsewhere, the US 10-year Treasury yields stay mostly unchanged in the last few hours, after rising 9.3 basis points (bps) to near 2.84% at the latest. It’s worth noting that the bond yields dropped the most in six months during May as market players trim bets on the Fed’s aggressive rate hikes after recently downbeat US inflation and growth numbers.

The geopolitical fears emanating from Europe and mixed concerns over China’s rebound, considering the recently downbeat activity data, also weigh on the GBP/JPY prices. Furthermore, concerns surrounding the Northern Ireland Protocol (NIP), ire over UK PM Boris Johnson’s moves during covid-led lockdowns and the Bank of England’s (BOE) alleged slow action to tame inflation also play background music to tame GBP/JPY prices.

Looking forward, GBP/JPY pair traders should pay close attention to the risk catalysts amid a light calendar left for the UK and Japan. As a result, the Biden-Powell meet and headlines relating to Brexit, the Russia-Ukraine crisis and China will be important to track.

Technical analysis

GBP/JPY takes a U-turn from the 50-DMA hurdle, surrounding 161.70, towards a two-week-old rising support line, close to 159.50 by the press time.