GBP/JPY renews monthly high around 163.50 amid firmer risk-on mood

• GBP/JPY picks up bids near one-month top, grinds higher after printing five-day uptrend.
• Market sentiment improves on softer data, preparations for NFP.
• Hawkish calls from the BOE, versus BOJ’s favor of easy money, underpin upside momentum.
• Off in the UK, a light calendar restricts moves but risk catalysts are the key to track for fresh impulses.

GBP/JPY picks up bids to refresh one-month top during Friday’s Asian session, rising for the sixth consecutive day despite grinding higher of late.

In doing so, the cross-currency pair struggles to justify upbeat sentiment and hawkish expectations from the Bank of England (BOE) amid the pre-NFP anxiety. It’s worth noting that a light calendar and holiday in the UK also restrict the GBP/JPY pair’s immediate moves.

Softer US data and downbeat Treasury yields previously favored the pair buyers. On the same line were the odds favoring more monetary policy divergence between the Bank of England (BOE) and the Bank of Japan (BOJ).

On Thursday, the US ADP Employment Change eased to 128K for May, versus 300K forecasts and a downwardly revised 202K previous reading. The Weekly US Initial Jobless Claims, on the other hand, dropped to 200K compared to 210K anticipated and 211K prior. Further, Nonfarm Productivity and Unit Labor Costs both improved in Q1, to -7.3% and 12.6% respectively, compared to -7.5% and 11.6% figures for market consensus. Furthermore, US Factory Orders for April softened to 0.3%, from a revised 1.8% in March and 0.7% forecast.

It’s worth noting that the Australia and New Zealand Banking Group (ANZ) highlights the difference between the currency BOE rate and the one per Taylor rule to suggest more work for the “Old Lady”. On the other hand, BOJ policymakers have been defending the easy money practices for a long with the recent tone shifting a bit but staying mostly in favor of no immediate change in policies.

Elsewhere, Tory critics, a UK Member of Parliament’s (MP), suggestion to rejoin the bloc and chatters over a no-confidence vote for UK Prime Minister (PM) Boris Johnson tried to weigh on the GBP/JPY prices.

Against this backdrop, the Wall Street benchmarks rose the most in a week whereas US Treasury yields remained pressured. At the latest, the S&P 500 Futures print mild gains while the US Treasury yields struggle around 2.92%, suggesting the market’s cautious optimism.

Technical analysis

Despite crossing the 200-SMA, around 161.50 by the press time, GBP/JPY buyers jostle with the 61.8% Fibonacci retracement of April-May downside, around 163.50, amid overbought RSI conditions.

Even if the quote rises past 163.50 immediate hurdle, highs marked during late April and March, respectively near 164.25 and 164.65, will challenge the pair’s further upside.

Hence, GBP/JPY runs out of steam despite the latest advances, suggesting a pullback from a multi-day high.