GBP/USD: Guppy bulls claim the 149.00 handle ahead of Bank of England Super Thursday

• The extreme oversold condition on Sterling is unwinding ahead of the Bank of England Super Thursday.
• GBP/JPY bulls are challenging the 200-period simple moving average on the daily time frame. 
• There is low safe-haven Japanese yen demand despite the US withdrawing from Iran nuclear deal.

The GBP/JPY is trading at around up % on Wednesday. 

In Asia GBP bulls broke the 148.00 handle and manage to push the cross 100 pips higher just above the 149.00 handle as the American forex session opened. GBP/JPY is now consolidating around the 149.00 level.

The extremely oversold position on the British pound is unwinding on most of the GBP pairs ahead of the Bank of England (BoE) Super Thursday. Investors have been rather over-reactive to BoE’s rate expectations. As a matter of fact, in April, market participants were highly anticipating a rate hike in May, however, the combination of poor key macroeconomic data in the UK and dovish comments from BoE’s officials brought the expectations close to zero in recent weeks. 

Viraj Patel at ING, notes that a “hawkish surprise for GBP markets would be a 6-3 MPC (three rate hike dissenters) split vote, which would give greater support to an August BoE rate hike (currently 50% priced in).” Indeed, if the BoE telegraphs that at least one rate hike is on the table in 2018, it can potentially support GBP.

On the other hand the there is limited Japanese yen demand despite the fact that on Tuesday the US pulled out of the Joint Comprehensive Plan of Action, more commonly known as Iran nuclear deal. The decision can potentially trigger heightened geopolitical tensions as China and Russia are also in the agreement. The US diplomatic relations with those two countries is already rather fragile. 

GBP/JPY 4-hour chart 

The bulls gathered some good momentum and their next target is seen at the 150.00 handle and at the 150.92 swing low. To the downside, the bears will try to drive the market back to the 148.50 and 148.00 psychological levels.