• GBP/JPY lacked any firm directional bias and remained confined in a range on Tuesday.
• The BoE rate hike signals continued lending some support to the sterling and the cross.
• The risk-off impulse benefitted the safe-haven JPY and capped any meaningful gains.

The GBP/JPY cross seesawed between tepid gains/minor losses through the Asian session and was last seen trading in the neutral territory, around the 154.00 mark.

A combination of diverging forces failed to provide any meaningful impetus to the GBP/JPY cross and led to a subdued/range-bound price action through the early part of the trading action on Tuesday. The British pound was supported by hawkish comments by the Bank of England (BoE) officials over the weekend, signalling an imminent interest rate.

Michael Saunders, one of the most hawkish members of the Monetary Policy Committee, suggested that investors were right to bring forward bets on rate hikes. Adding to this, the BoE Governor Andrew Bailey warned of a potentially very damaging period of inflation unless policymakers take action and continued acting as a tailwind for the sterling.

That said, the risk-off impulse underpinned the safe-haven Japanese yen and capped gains for the GBP/JPY cross. Worries that the recent surge in crude oil/energy prices will stoke inflation and derail the global economic recovery have been fueling fears about stagflation. This, in turn, tempered investors' appetite for perceived riskier assets, like equities.

Meanwhile, the range-bound price action comes on the back of the recent strong positive move to the highest level since June 25 and might still be categorized as a consolidation phase. Hence, any meaningful dip might still be seen as a buying opportunity and is more likely to remain limited ahead of Tuesday's release of the UK monthly employment details.

Technical levels to watch