GBP/JPY sees choppy, two-way trade but ultimately flat in upper 155.00s as incoming risk events eyed

• GBP/JPY has seen two-way price action on Monday but is ultimately flat in the upper 155.00s.
• The tone to broader FX market trade has been quiet as key events loom later in the week.
• GBP/JPY traders should not only watch BoE/BoJ speakers and UK data, but also US CPI, which could impact broader sentiment.

GBP/JPY was mixed on Monday, slipping back from earlier session highs to the north of the 156.00 level only to then rebound strongly from a dip towards 155.00. At current levels around 155.75, the pair is trading broadly flat on the day amid the broader directionless tone to FX market trade. Markets are in wait-and-see mode ahead of a variety of G10 central bank speakers appearing throughout the week and ahead of US inflation figures out on Thursday. GBP/JPY traders should also keep an eye on UK Q4 GDP growth and December activity data that will be closely watched by a BoE that is worried about inflation and worsening growth prospects simultaneously.

As the theme of central bank policy divergence regains control of the driver's seat with regards to FX market price action, and as the BoE presses ahead with policy tightening whilst the BoJ retains its ever ultra-dovish stance, GBP/JPY might continue to face gentle, long-term upwards pressure. That suggests a return to annual highs in the upper 157.00s remains a decent near-term bet for some bulls. But traders should keep an eye on risk appetite and US equity markets, which are at risk of a further correction lower if US inflation data this week triggers a further build-up of hawkish Fed bets. Markets are currently pricing about a one in three chance the Fed hikes by 50bps in March.