GBP/JPY remains below 189.00 mark, moves little after mixed UK macro data

• GBP/JPY attracts some dip-buying for the second straight day, albeit lacks follow-through.
• The uncertainty over the BoJ’s next policy move undermines the JPY and lends support.
• The mixed UK macro data does little to impress the GBP bulls or provide any impetus.

The GBP/JPY cross turns positive for the second successive day following an early dip to the 188.40 region on Wednesday and looks to build on the overnight bounce from a near one-month low. Spot prices, meanwhile, react little to the UK macro data and hold steady around the 189.00 mark during the early European session.

The Japanese Yen (JPY) meets with a fresh supply after the Bank of Japan (BoJ) Governor Kazuo Ueda reiterated that the central bank will seek an exit from easy policy when achievement of 2% inflation is in sight. The comments smashed hopes for an imminent shift in the BoJ’s policy stance next week, which, in turn, undermines the JPY and assists the GBP/JPY cross to attract some dip-buying.

Investors, however, seem convinced that the BoJ will pivot away from its ultra-dovish policy stance and exit the negative interest rates regime in the coming months. The bets were reaffirmed by positive news on wage hikes in Japan, which is expected to fuel consumer spending and demand-driven inflation. This, along with geopolitical risks, helps limit losses for the JPY and caps the GBP/JPY cross.

The British Pound (GBP), on the other hand, is underpinned by expectations that the Bank of England (BoE) might keep interest rates higher for longer. Meanwhile, the upbeat UK GDP print, showing that the economy expanded by 0.2% in January, was overshadowed by weaker Industrial and Manufacturing Production figures. This, in turn, does little to provide any impetus to the GBP/JPY cross.

The aforementioned fundamental backdrop, however, seems tilted in favour of bullish traders. That said, it will still be prudent to wait for some follow-through buying before positioning for any meaningful appreciating move ahead of next week’s key central bank event risk – the highly-anticipated BoJ monetary policy decision on Tuesday.