GBP/JPY Price Firm Above 155 as Yields Ease, Risk Sentiment Improves

• GBP/JPY is consolidating its highest daily gain since September 2021.
• Under Powell’s leadership, yields failed to sustain growth amid a sluggish session and concerns about the Kyiv-Moscow peace talks.
• Brexit supporters hail the return of skilled labor, BOE’s Tenreyro emphasizes economic concerns, and UK PM Johnson teases Putin supporters.
• Thanks to the final UK services reading for February, there will be a bright spot on the calendar, but risk catalysts will be more important.

During Thursday’s Asian session, the GBP/JPY price remains bullish, around 155.00, after recovering from a 10-week low the previous day. However, the recent consolidation of the cross-currency pair may be due to concerns over major data/events and the lack of key catalysts.

Cautious optimism regarding a possible round of peace talks between Russia and Ukraine is battling rising expectations that the Fed will raise rates sooner than later.

The Russian negotiator made an announcement of a potential round of diplomatic talks on Thursday. Interfax also stated that a ceasefire will be discussed in the upcoming negotiations with the Ukrainian delegation.

In addition, the increased probability of a 0.50% rate hike at the March Fed meeting, according to the CME tool FedWatch, also challenges the market’s optimism. As measured by the 10-year breakeven inflation rate of the St. Louis Federal Reserve (FRED), inflation expectations in the US rose to a 15-week high.

The unusual sentiment is made worse by the downgrading of Russia by global rating agencies such as Moody’s and Fitch.

To deflect criticism of Brexit, the Daily Express cites data showing an increase in EU citizens in the UK. The Guardian reported that British Prime Minister Boris Johnson spoke with Ukrainian President Volodymyr Zelenskyy and said he would publish a list of everyone linked to the Putin regime. Furthermore, politicians from the Bank of England (BOE), including Silvana Tenreiro and John Cunliffe, have highlighted the risks associated with Russia’s invasion of Ukraine.

Meanwhile, BOJ member Junko Nagaya said on Thursday that Japan’s economic outlook has remained highly uncertain since January.

With this backdrop, S&P 500 futures are posting modest losses, while US 10-year Treasury yields are also down 1.2 basis points (bps) to 1.85% at press time.

Another bright spot on the calendar is the final reading of the UK services PMI for February, which is expected to confirm the 60.8 reading. However, to provide clear guidance, the focus should be on geopolitical headlines.

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GBP/JPY price technical analysis: Bulls aiming at 200-SMA

The GBP/JPY price managed to climb above the 20-period SMA on the 4-hour chart. Meanwhile, the cross is aiming to hit the 200-period SMA at 155.30. The upside wave is almost vertical, suggesting a strong uptrend. The volume data shows the same support for the bulls.

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Contrarily, the key support level lies at 154.45 ahead of 154.00. After such an impulsive rally, the cross can consolidate gains and correct lower before continuing further upside.