GBP/JPY flat-lines around 183.00; awaits BoE, BoJ policy meetings later this week

• GBP/JPY gains some positive traction on Monday, though the upside remains limited.
• A combination of factors undermines the safe-haven JPY and lends support to the cross.
• Traders, however, seem reluctant ahead of this week's key data/central bank event risks.

The GBP/JPY cross kicks off the new week on a positive note, albeit lacks follow-through buying and remains confined in Friday's broader trading range. Spot prices trade around the 183.00 round figure, near the 50-day Simple Moving Average (SMA) during the Asian session and remain well within the striking distance of a five-week low touched last Thursday.

The Japanese Yen (JPY) continues with its relative underperformance in the wake of expectations that the case for an imminent shift in the Bank of Japan's (Bo) dovish stance is still not very strong. This, along with a generally positive tone around the equity markets, is seen as another factor denting the JPY's safe-haven status and acting as a tailwind for the GBP/JPY cross. That said, the recent comments by BoJ Governor Kazuo Ueda fueled speculation that the Japanese central bank could move away from ultra-loose policy.

In an interview with Yomiuri newspaper earlier this month, Ueda said that ending negative interest rates is among the options available if the BoJ becomes confident that prices and wages will keep going up sustainably. Apart from this, diminishing odds for more aggressive policy tightening by the Bank of England (BoE) further contribute to capping the upside for the GBP/JPY cross. In fact, BoE Governor Andrew Bailey had told lawmakers that the central bank is now "much nearer" to ending its run of interest rate increases.

Moreover, reviving recession fears and signs that the UK labour market is cooling could put pressure on the BoE to pause its rate-hiking cycle. Traders also seem reluctant to place aggressive bets and prefer to wait on the sidelines ahead of this week's key data/central bank event risks. The UK consumer inflation figures are due for release on Wednesday, which will be followed by the crucial BoE monetary policy meeting on Thursday. This will influence the British Pound and provide a meaningful impetus to the GBP/JPY cross.

The market attention will then shift to the BoJ monetary policy update on Friday, which could infuse volatility around the JPY pairs. This might further assist investors in determining the next leg of a directional move for the GBP/JPY cross. In the meantime, spot prices seem more likely to consolidate in a range in the wake of a Japanese holiday and absent relevant market-moving economic releases from the UK on Monday.

Technical levels to watch