GBP/JPY climbs beyond mid-196.00s, hits fresh weekly top ahead of UK CPI

GBP/JPY recovers further from over a one-month low set on Tuesday amid renewed JPY selling.

Receding safe-haven demand, along with the BoJ uncertainty, undermines the safe-haven JPY. 

The technical setup warrants caution for bulls ahead of the crucial UK consumer inflation data. 

The GBP/JPY cross is seen building on the previous day's strong rebound from the 193.60-193.55 area, or its lowest level since October 8 and gaining positive traction for the third consecutive day on Wednesday. The momentum lifts spot prices beyond the mid-196.00s during the Asian session and is sponsored by the emergence of fresh selling around the Japanese Yen (JPY).

Comments from Russian and US officials helped ease market concerns about the onset of a full-blown nuclear war. This, along with the uncertainty over the timing of further monetary policy tightening by the Bank of Japan (BoJ), undermines the safe-haven JPY. Meanwhile, hopes that the UK government’s fiscal stimulus to bolster domestic demand will lead to inflationary pressures and delay the Bank of England's (BoE) rate-cutting cycle offer some support to the British Pound (GBP). This further seems to act as a tailwind for the GBP/JPY cross.

That said, speculations that Japanese authorities might intervene in the FX market to prop up the domestic currency, coupled with geopolitical uncertainties, might hold back the JPY bears from placing aggressive bets. Investors might also refrain from placing aggressive directional bets around the GBP/JPY cross and opt to wait for the release of the latest UK consumer inflation figures. The crucial data will play a key role in influencing the broader sentiment surrounding the GBP and provide some meaningful impetus to the currency pair.