• GBP/JPY defends two-week uptrend despite retreating from intraday high.
• US Treasury bond yields recover amid market’s anxiety ahead of this week’s bumper data/events.
• UK Chancellor Hunt resists tax cuts until public finances improve.
• BoJ versus BoE concerns could play a major role in directing short-term moves.

GBP/JPY prints mild gains around 161.00 as it portrays the market’s cautious mood at the start of the key week comprising multiple monetary policy meetings and crucial data. Even so, the cross-currency pair manages to defend the two-week recovery amid upbeat US Treasury bond yields, as well as hawkish hopes from the Bank of England (BoE).

US 10-year Treasury yields remain lackluster near 3.51%, mildly bid by the press time, after snapping a two-week downtrend by the end of Friday. That said, concerns surrounding the BoE’s 0.50% rate hike to tame upbeat inflation appear to keep the GBP/JPY buyers hopeful.

It’s worth noting that the talks surrounding UK’s hesitance from tax cuts also seem to underpin the pair’s upside momentum. Reuters quotes British finance minister Jeremy Hunt as saying on Friday that he aims to prioritize tax cuts for businesses once there is room in the public finances to do so.

On the flip side, the Bank of Japan’s (BoJ) repeated attempts to defend the Yield Curve Control (YCC), amid recently firmer inflation data from Tokyo, keep GBP/JPY sellers hopeful. On the same line could be the comparatively firmer fundamentals surrounding Japan than that of the UK.

Looking forward, GBP/JPY prices may witness a short-term rebound amid cautious optimism in the market, as well as receding fears of the UK’s workers’ strikes. However, major attention will be given to the BoE’s rate hike and attempts to tame inflation without harming productivity.

Technical analysis

Although the 21-DMA puts a floor under the GBP/JPY prices near 159.50, a one-month-old descending resistance line surrounding 161.65 holds the key for buyer’s entry.