• GBP/JPY pulled back under 156.00 on Friday, though the bullish trend since January remains in play.
• The pair will be focused on risk appetite, comments from BoE’s Bailey and UK GDP figures next week.

Despite a modest rally in the US equity space that would normally have a positive impact on GBP/JPY, the pair pulled back on Friday, slipping back under and the 156.00 level, though finding support above 155.50. The pair still trades a decent amount above its pre-hawkish BoE surprise levels of under 155.50, however, and looks set to close out the week about 1.0% higher despite Friday’s 0.3% pullback from weekly highs in the 156.50 area.

Looking at the pair from a technical perspective, the bullish trend that has dominated since January 24 remains in play and, if anything, Friday’s pullback is just a reversion to this trend. Near-term technical momentum this continues to point higher and bulls will be hoping that risk appetite steadies at the start of next week and facilitates a recovery back towards this week’s highs in the 156.50 area and perhaps the 18 January highs just under 157.00 beyond that.

Fundamentally speaking, central bank divergence perhaps also favours further GBP/JPY upside, with BoJ governor Haruhiko Kuroda flexing his dovish credentials on Friday in stark contrast to the inflation concerned BoE that lifted rates for a second successive meeting this week. On which note, BoE Governor Andrew Bailey will be speaking next Wednesday ahead of the release of UK Q4 GDP and December activity figures on Friday. The data calendar in Japan contains a smattering of tier two releases that are unlikely to impact JPY.