GBP/JPY Analysis: Highs Since December 2015

The GBP/JPY chart shows that this currency pair is in an uptrend (nearly +17% YTD) which can be explained by differences in economies. While the UK is fighting a rate hike against inflation (which has shown double digits), Japan continues to pursue an ultra-soft monetary policy.

Technically, the bulls still have a chance to reach the upper boundary of the channel (shown in blue), where the psychological resistance level of 190 yen per pound passes, but the situation may change:

→ First, the Japanese authorities are concerned. “We closely monitor the movement of the currency. We will respond appropriately if it becomes excessive,” Vice Finance Minister and Chief Currency Strategist Masato Kanda said today. Recall that the Bank of Japan has already taken interventions in the foreign exchange market to support the yen in September and October last year — and this has yielded results.

→ Secondly, the bullish momentum for the pound may weaken. Bank of America analysts' forecast for the pound is one of the most pessimistic among the G10. In their opinion, the fight against inflation in the UK will be the strongest, and the risk of a hard landing has increased.

(!) Please note that today at 16:30 GMT+3 speeches of the heads of central banks, including those of Japan and Great Britain, are scheduled. Get ready for a surge in volatility.