• GBP/JPY regains positive traction on Friday and snaps a two-day losing streak.
• The uncertainty over the BoJ’s policy path weighs on the JPY and lends support.
• Speculations that the BoE’s rate hiking cycle is nearing the end caps the upside.

The GBP/JPY cross attracts some buying near the 160.50 area on Friday and stalls this week's pullback from the YTD peak. The cross sticks to its gains around the 161.00 mark through the early European session and for now, seems to have snapped a two-day losing streak.

The Japanese Yen (JPY) weakens across the board amid the uncertainty over the path of monetary policy under new Bank of Japan (BoJ) Governor Kazuo Ueda, which, in turn, lends support to the GBP/JPY cross. Investors have been speculating that Ueda will dismantle the yield curve control easing mechanism. That said, data released this week showed the world’s third-largest economy grew at a slower-than-expected pace in the fourth quarter and making it prudent for the BoJ to stick to its ultra-lose monetary policy stance.

That said, any meaningful upside for the GBP/JPY cross seems elusive, at least for the time being, amid expectations that the Bank of England's (BoE) current rate-hiking cycle might be nearing the end. The bets were lifted by softer-than-expected UK consumer inflation figures on Wednesday, which might have eased pressure on the UK central bank to tighten its monetary policy more aggressively. This, to a larger extent, offsets the better-than-expected UK Retail Sales figures for January and might hold back bulls from placing fresh bets.

Apart from this, a generally weaker tone around the equity markets - amid looming recession risks - benefits the safe-haven JPY and further contributes to capping the GBP/JPY cross. Hence, it will be prudent to wait for some follow-through buying before positioning for the resumption of the recent positive trend witnessed over the past two weeks or so. Nevertheless, spot prices remain on track to register first weekly gains in the previous three.

Technical levels to watch