• GBP/JPY gains strong positive traction for the third successive day on Wednesday.
• The stronger UK CPI lifts bets for more BoE rate hikes and boosts the British Pound.
• The pre-Fed anxiety benefits the safe-haven JPY and acts as a headwind for the cross.
• Bulls also seem reluctant to place fresh bets ahead of the BoE meeting on Thursday.

The GBP/JPY cross builds on this week's strong rally from the vicinity of mid-158.00s and scales higher for the third successive day on Wednesday. Spot prices, however, trim a part of the intraday gains to a one-week high and retreat below mid-162.00s in the last hour.

The British Pound strengthens across the board following the release of stronger-than-expected UK consumer inflation figures, which turns out to be a key factor pushing the GBP/JPY cross higher. In fact, the UK Office for National Statistics (ONS) reported that the headline CPI jumped from 10.1% in the previous month to a 10.4% YoY rate in February, surpassing consensus estimates. Adding to this, the core CPI, which excludes volatile food and energy prices, rose to 6.2% last month after decelerating to 5.8% in January, adding pressure on the Bank of England (BoE) to keep raising rates further and boosting the Sterling Pound.

Apart from this, easing fears of a full-blown banking crisis turn out to be another factor behind the safe-haven Japanese Yen's (JPY) relative underperformance and provide an additional boost to the GBP/JPY cross. The recent news that UBS will rescue Credit Suisse in a $3.24 billion deal helped calm nerves about the contagion risk and prompted investors to cautiously return to riskier assets. This led to a strong two-day rally in the equity markets, which, in turn, drove flows away from traditional safe-haven assets. Apart from this, the Bank of Japan's (BoJ) dovish tilt might continue to weigh on the JPY.

That said, the anxiety ahead of the highly-anticipated FOMC monetary policy decision on Wednesday keeps a lid on the optimism in the markets and caps the GBP/JPY cross. Traders also seem reluctant to place aggressive bets and prefer to lighten their bets heading into the BoE policy meeting on Thursday. Nevertheless, the aforementioned fundamental backdrop suggests that the path of least resistance for spot prices is to the upside. That said, repeated failures to find acceptance above a technically significant 100-day Simple Moving Average (SMA) warrant some caution before positioning for further gains.

Technical levels to watch