The GBP/JPY cross edges higher for the third straight day on Tuesday and sticks to its mildly positive bias through the early European session. The cross is placed just above the 161.50 area and remains within striking distance of a nearly two-month high touched last week.
The Japanese Yen (JPY) weakens in reaction to mixed domestic data and is a key factor supporting the GBP/JPY cross. The flash Manufacturing PMI fell more-than-expected, to 47.4 in February, offsetting a rise in the service sector activity. That said, looming recession risks and geopolitical tensions help limit losses for the safe-haven JPY.
Apart from this, expectations that the Bank of England’s (BoE) current rate-hiking cycle is nearing the end undermines the British Pound and contributes to capping the upside for the GBP/JPY cross. Traders also seem reluctant to place aggressive bets and prefer to wait on the sidelines ahead of the newly nominated head of the Bank of Japan (BoJ) Governor Kazuo Ueda’s testimony on Friday.
Market participants will closely scrutinize Ueda’s view on the future of yield curve control (YCC) and super-easy monetary policy. This will be key in influencing the JPY and provide a fresh directional impetus to the GBP/JPY cross. In the meantime, Tuesday’s release of the flash UK PMI prints for February might provide some impetus and allow traders to grab short-term opportunities.