• GBP/JPY has spent most of Monday’s quiet, holiday-thinned trading session close to six-year highs around the 165.00 level.
• The pair trades over 9.0% higher versus March lows, with the gains driven by BoE/BoJ policy divergence.
• The next key area of support isn't until the 175.00 area, a further 6.0% higher versus current levels.

GBP/JPY has spent the majority of Monday’s quiet, holiday-thinned trading session close to more than six-year highs around the 165.00 level, with commentary from Japan’s Finance Minister and the BoJ Governor during Asia Pacific hours failing to support the yen. Neither gave the market much to go on regarding potential policymaker intervention to strengthen the yen, suggesting that GBP/JPY’s recent more than 9.0% rally from March lows may yet have legs to run.

Indeed, while the BoE is getting increasingly worried about weak UK growth as a result of the cost-of-living squeeze, they still intend to lift interest rates higher in the coming months. Meanwhile, BoJ Governor Haruhiko Kuroda on Monday said it was premature to discuss an exit from the BoJ’s flagship negative interest rate and yield curve control policies. This widening of the policy differential, which is primarily driven by much higher inflation in the UK versus Japan, has been a key driver of recent yen weakness alongside a sharp rise in global government bond yields (excluding in Japan).

When proper sterling flows return to the market on Tuesday, GBP/JPY bulls will be looking to extend recent gains and for a proper push into the 165.00s. Alarming for the yen bulls, the next key area of GBP/JPY resistance isn’t until around the 175.00 area, a further more than 6.0% rally from current levels. In terms of this week’s main calendar events, eyes will be on the IMF meetings taking place all week, commentary from BoE Governor Andrew Bailey on Thursday and Friday and UK flash April PMI survey results on Friday.