GBP/JPY skyrockets past 134.00 on Yen weakness

GBP/JPY has skyrocketed more than 1 full figure from session lows of 133.00 to session highs of 134.24 amid a continuation of the Yen weakness theme seen on Monday, as market participants continue to price in a new economic stimulus package annonced by Japan's PM Abe after winning a landslide election victory.

The benchmark Japanese Nikkei 225 is up by +3.4% within 1 hour of morning trade, a robust performance that follows Monday's 4+% gains. As a result, gold is trading lower and US 30-year yields edging higher, all supporting the case for an extension of risk appetite conditions.

GBP/JPY outlook for this week

As James Chen, CMT, Strategist at CityIndex, notes: "GBP/JPY could face potentially substantial volatility this week. Thursday brings the Bank of England’s (BoE) official rate decision and monetary policy summary. After the UK’s EU referendum more than two weeks ago, the central bank has indicated on a few occasions that it would likely cut interest rates in reaction to Brexit risks. Currently, the consensus forecast is indeed for a rate cut of 25 basis points on Thursday."

On a more technical level, James adds: "Since June’s Brexit outcome, GBP/JPY has dropped precipitously from the 150.00’s down to its recent lows around key 130.00 support, a level not seen since late 2012. Monday’s rebound prompted a sharp rise from that support level to climb back above 133.00 resistance. This rebound could well have more room to run in the short-term, potentially back up to key resistance around 140.00."