• GBP/JPY remains sidelined around multi-day top during three-day uptrend.
• Treasury yields weigh on yen, UK-NZ trade deal gains criticism from Scotland.
• British covid conditions worsen, political imbalance feared in Japan.

GBP/JPY bulls flirt with five-year highs, defending the 158.00 threshold during early Thursday.

The cross-currency pair portrays broad Japanese yen (JPY) weakness due to the firmer US Treasury yields and political challenges in Tokyo. In doing so, the quote ignores downbeat UK data and qualitative factors like coronavirus and Brexit headlines from Britain.

Escalating doubts over Fumio Kishida’s future as Japanese Prime Minister (PM), as portrayed by the survey shared by Nikkei for October 31 elections, portrays political uncertainty in Japan. Also challenging the Asian nation is the acceptance of the energy challenges on hand by Japan's Industry Minister (Ministry of Economy, Trade and Industry).

On the other hand, the UK signs a landmark trade deal with New Zealand but Scotland highlights challenges for British farmers to criticize the pact. Also, cautious sentiment ahead of this week’s UK-EU meet in Brussels, to overcome the Brexit deal, challenges the British pound buyers. Additionally, the UK's National Health Service (NHS) warns to take another plan to tame the British covid infections as cases spike to daily high and the virus-led deaths jump to seven-month peak the previous day.

It’s worth mentioning that the UK’s inflation data came in softer than expected for September but the BOE’s rate hike expectations stay on the table, which in turn helps the GBP to remain firmer.

On a broader front, fears emanating from China’s Evergrande and Fed tapering underpin the US Treasury yields to remain firmer at the five-month top around 1.66%. The same weighs on the stock futures and yen.

Considering a lack of major data/events in both Japan and the UK, GBP/JPY traders need to track the US Treasury yields and risk catalysts for fresh direction ahead of Friday’s key PMI data and UK Retail Sales for September.

Technical analysis

Unless breaking the weekly support line around 157.55, not even short-term GBP/JPY sellers may take the risk of entries.