British Pound turns lower as bulls shrug hawkish BoE; downside seems limited vs weak Yen

The British pound experienced a decline as investors ignored hawkish comments from the Bank of England (BoE). Throughout the day, the GBP/JPY cross saw renewed selling pressure, falling to the lower end of its daily range in the first half of the European session. Currently, the pair is trading around the 211.70 level, although traders should exercise caution when considering aggressive bearish trading strategies.

A stronger US dollar, fueled by expectations of an aggressive Federal Reserve (Fed) policy tightening, is weighing on the British pound and negatively impacting the GBP/JPY cross. However, the BoE's hawkish stance could potentially limit deeper losses for the pound.

Deputy Governor Clare Lombardelli of the BoE stated that further interest rate increases are likely due to high energy prices and the resilience of the UK economy. Meanwhile, Japan's household spending declined for the 10th consecutive month in September, complicating the Bank of Japan's (BoJ) plans for additional interest rate hikes. This situation, coupled with a prevailing risk-on mood, is seen as undermining the safe-haven status of the Japanese yen (JPY), which should provide support for the GBP/JPY cross.

Investors are advised to wait for strong follow-through selling before positioning for significant depreciation in the near term. Moving forward, traders are eagerly anticipating Thursday's release of UK macro data, including the preliminary Q3 GDP print. In the meantime, supportive factors indicate that some dip-buying may emerge at lower levels.

However, before placing fresh bets, bulls must wait for sustained strength and acceptance above a technically significant 100-day Simple Moving Average (SMA) resistance, presently located at around the 213.00 round figure.