GBP/JPY sticks to gains near weekly high, just below 164.00 mark ahead of UK budget

• GBP/JPY scales higher for the second straight day and touches a fresh weekly high.
• The heavily offered tone surrounding the JPY remains supportive of the move up.
• Traders now look forward to the UK government’s budget report for some impetus.

The GBP/JPY cross builds on this week's solid bounce from the 160.00 psychological mark, or a one-month low touched earlier this week and gains traction for the second successive day on Wednesday. The momentum lifts spot prices to a fresh weekly high during the first half of the European session, though bulls seem to struggle to find acceptance above the 164.00 round figure.

A combination of factors continues to weigh heavily on the Japanese Yen (JPY), which, in turn, is seen acting as a tailwind for the GBP/JPY cross. Market participants seem convinced that the Bank of Japan (BoJ) will stick to its dovish stance to support the fragile domestic economy. In fact, the incoming BoJ Governor Kazuo Ueda recently stressed the need to maintain the ultra-loose policy settings and said that the central bank isn't seeking a quick move away from a decade of massive easing. Apart from this, a generally positive risk tone further contributes to driving flows away from the safe-haven JPY.

Investors turned optimistic amid easing fears about a broader systemic crisis from the sudden collapse of Silicon Valley Bank (SVB). This led to the overnight relief rally on Wall Street and is evident from a stable performance around the European equity markets. That said, the BoJ meeting minutes released earlier this Wednesday showed that policymakers debated the feasibility of making further tweaks to the bond yield control in January. Moreover, the board also agreed that inflation and wages could overshoot expectations, suggesting a phase-out of its massive stimulus remained on the cards.

Apart from this, expectations that the Bank of England (BoE) could pause its rate-hiking cycle next week, amid signs that the UK wages are cooling, hold back bullish traders from placing aggressive bets around the British Pound. This, in turn, might keep a lid on any meaningful appreciating move for the GBP/JPY cross, at least for the time being. Traders now look to the UK government's Spring Budget amidst the gloom in the UK economy owing to soaring inflation and a cost of living crisis. This will play a key role in influencing the Sterling Pound and provide some meaningful impetus to the GBP/JPY cross.

Technical levels to watch