GBP/JPY Outlook: Bulls Hit 158 as the Soaring Yields Weigh on JPY
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- The GBP/JPY is taking bids to renew multi-day highs and exits a 3-day uptrend.
- Ten-year and two-year Treasury yields rose to their highest levels since May 2019.
- The market’s sentiment deteriorates following mixed news headlines from Russia and Ukraine following the Federal Reserve’s hawkish remarks and inflation fears.
- Bond market movements play a key role in short-term market directions because they act as a risk catalyst.
The GBP/JPY outlook remains bullish as it hit an October 2021 high on Tuesday, accepting bids at 158.00, up 0.45% intraday ahead of the London open.
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At the same time, the cross-currency pair supports the overall weakness of the yen, primarily due to higher US Treasury yields. Both Moscow and Kyiv have reported positive news recently, which speaks well for the couple.
Rising US Treasury yields
As of press time, 10-year and 2-year Treasury yields were at their last highs in May 2019, with rates around 2.35% and 2.14%, respectively.
The recent bond rise is a result of the Fed’s aggressive rate hikes and inflation concerns. Bostic and Barkin indirectly helped contain inflation by indicating an accelerated pace of rate hikes. Powell’s comments suggesting that the Fed would raise rates by 25 basis points or more at one or more meetings contributed significantly to the price of Treasury coupons.
Furthermore, comments from International Monetary Fund (IMF) Asia-Pacific Director Changyong Rhee said: “The US has room to raise interest rates.” Moreover, tighter US inflation expectations, such as a 10-year break-even inflation rate according to St. Louis Federal Reserve (FRED), put further downward pressure on bond yields.
Russian aggression to continue
According to Reuters, Russia’s second coupon payment has joined Ukrainian President Volodymyr Zelenskyy in challenging a pair of bears lately regarding Ukraine’s commitment not to seek NATO membership. Interfax was unable to make an immediate decision on the occupied territory of Ukraine earlier today, according to Ukraine’s President Zelenskyy. Joe Biden also expressed concerns about a cyberattack against the United States.
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What’s next for GBP/JPY outlook?
Watch the UK inflation data and the preliminary PMIs for March to find the fresh trading stimulus.
GBP/JPY price technical outlook: Bulls to roar
The GBP/JPY price is constantly soaring to new highs above. The cross has recently hit the 158.00 level. The 4-hour chart shows extremely bullish behavior. However, after a massive rally, we expect the price to lower amid profit-taking. In that case, the 20-period SMA around 156.70 will be the critical support to watch.
