GBP/JPY recovers 181.00 handle as BoE grapples with sticky inflation

• The GBP/JPY has rebounded into the 181.00 handle after Wednesday’s decline into nine-week lows.
• BoE held rates steady on Thursday, but sees ongoing inflation fight looking forward.
• Friday to close out the trading week with UK PMIs.

The GBP/JPY is back into the 181.00 handle heading into Friday’s trading session, with the pair bouncing from nine-week lows hit early on Thursday as the Pound Sterling (GBP) struggles against the Japanese Yen (JPY).

The GBP is steeply off recent highs against the Yen, but the GBP/JPY caught a much-needed bounce on Thursday after a hawkish Bank of England (BoE) kept rates unchanged, but warned of the possible need for further rate hikes if inflation doesn’t come to heel quick enough.

Read More: BoE leaves interest rate unchanged at 5.25% as forecast

To round out the week’s economic data docket, UK S&P Global/CIPS Purchasing Managers’ Index (PMI) figures are due at 09:30 GMT during the London/Europe market session. The UK’s Preliminary Composite PMI for December is expected to tick upwards from 50.7 to 50.9, with the Manufacturing and Services Components both expected to show similar gains.

The Manufacturing PMI component is forecast to increase from 47.2 to 47.5, while the Services PMI component for December is expected to see a slight uptick to 51.0 from November’s 50.9.

GBP/JPY Technical Outlook

The GBP/JPY is pinned back into the 181.00 handle after a rebound from nine-week lows near 178.35, stuck into the 50-hour Simple Moving Average (SMA) while the 200-hour SMA descends aggressively into 183.00, capping off near-term bullish potential.

Looking further out, the daily candlesticks see long-term technical support from the 200-day rising through the 178.00 handle, with the upside capped off by the 50-day SMA just north of 184.00.

Swing highs continue to etch in new territory, and downside momentum remains limited as the major 180.00 handle remains a significant barrier for sellers to overcome.

GBP/JPY Hourly Chart

GBP/JPY Daily Chart

GBP/JPY Technical Levels