GBP/JPY Rallies to One-Month High on Upbeat Sentiment and Brexit

Apr 2, 2023

GBP/JPY continues its winning streak, with bulls pushing the pair to a new one-month high around 165.50. The positive sentiment driving the rally could be attributed to upbeat news on Brexit, with UK Prime Minister Rishi Sunak announcing a £1.8billion boost as Britain signed up to the Trans-Pacific Partnership. However, the latest Japan inflation data released on Friday was lower than previous levels, with the Tokyo CPI at 3.3% in March, compared to the expected 2.7%. Despite this, the GBP/JPY remained strong, with yields reflecting the market's cautious mood ahead of top-tier inflation numbers from the US and UK.

Other economic data from Japan showed growth in industrial production and retail trade, but a surprise jump in unemployment rate led to weakness in the Japanese Yen (JPY). Meanwhile, Bank of Japan policymakers defended their easy money status, which contrasts with the hawkish rhetoric among Bank of England officials, supporting the GBP/JPY prices. Additionally, recent easing of market fears from banking turmoil and hopes of less severe rate hikes from key central banks have boosted the pair's momentum.

The US 10-year Treasury bond yields remain pressured, while Wall Street closed positively for the third consecutive day, with S&P 500 Futures also printing mild gains. Looking ahead, the final reading of the UK's Q4 GDP will be crucial to watch for the intraday move. However, the headlines surrounding inflation data from Eurozone and the US, as well as central bankers' reactions, will attract major attention.