GBP/JPY Price Analysis: Eyes 171.00 as BoE sets to raise rates further to tame stubborn UK Inflation

• GBP/JPY is expected to stretch rally further as BOE looks set to deliver one more rate hike.
• UK’s inflation has remained extremely stubborn amid labor shortages and historically high food inflation levels.
• GBP/JPY is building an inventory adjustment phase after refreshing the seven-year high at 172.33.

The GBP/JPY pair has stretched its recovery move to near 170.75 in the Asian session. The cross is aiming to refresh its weekly high above 171.00 as investors are anticipating one more interest rate hike from the Bank of England (BoE) to tame double-digit United Kingdom inflation.

This would be the 12^th consecutive interest rate hike from BoE Governor Andrew Bailey. As per the expectations, the BoE will hike interest rates by 25 basis points (bps) to 4.50%. UK’s inflation has remained extremely stubborn amid labor shortages and historically high food inflation levels. Also, UK businesses are looking to pass on the impact of higher wages to end consumers, which would create more trouble for the BoE.

On the Japanese Yen front, investors are awaiting the release of the Bank of Japan (BoJ) Summary of Opinions, which will provide a detailed explanation behind the continuation of the ultra-dovish monetary policy.

GBP/JPY is building an inventory adjustment phase after refreshing a seven-year high at 172.33 on a weekly scale. The cross is needed to gather strength for a fresh rally. Upward-sloping 10-period Exponential Moving Average (EMA) at 166.87 is providing a cushion to the Pound Sterling bulls.

The Relative Strength Index (RSI) (14) has shifted into the bullish range of 60.00-80.00, indicating an activation of the upside momentum.

A confident move above the previous week's high at 172.33 will support the cross to print at a fresh seven-year high of 173.00 followed by 25 January 2016 high at 174.18.

On the flip side, a breakdown below May 09 low at 169.85 will further drag the asset toward May 03 low at 169.14. A slippage below the latter will further drag the asset toward May 05 low around 168.00.

GBP/JPY weekly chart