GBP/JPY eases from multi-week high, still well bid around mid-164.00s amid risk-on

• GBP/JPY gains traction for the sixth successive day and climbs to a nearly three-week high.
• The UK government's U-turn on planned tax cut continues to underpin the British pound.
• The risk-on mood weighs on the safe-haven JPY and contributes to the appreciating move.

The GBP/JPY cross builds on last week's strong recovery from its lowest level since February 2021 and scales higher for the sixth successive day on Tuesday. Spot prices, however, trim a part of intraday gains to a nearly three-week high and retreat to mid-164.00s during the mid-European session.

Investors welcomed the UK government's U-turn on a controversial tax cut plan announced in its mini-budget last week. Furthermore, the Bank of England reaffirmed its willingness to buy up to £5 billion of long-dated gilts, which continues to act as a tailwind for the British pound and the GBP/JPY cross.

The Japanese yen, on the other hand, is undermined by the dovish adopted by the Bank of Japan, which marks a big divergence in comparison to other major central banks. This, along with the risk-on impulse, weighs on the safe-haven JPY and provides an additional lift to the GBP/JPY cross.

Japan's Finance Minister Shunichi Suzuki, meanwhile, said on Monday that the country stands ready to take decisive steps in the foreign exchange market if excessive yen moves persist. This, in turn, helps limit losses for the JPY and keeps a lid on the GBP/JPY cross, at least for the time being.

From a technical perspective, the overnight sustained strength beyond the 163.00 supply zone, which coincides with the 100-day SMA, favours bullish traders and supports prospects for additional gains. Hence, any meaningful pullback could still be seen as a buying opportunity and remain limited.

Technical levels to watch