• GBP/JPY bulls move to the sidelines as intervention fears offer some support to the JPY.
• Economic concerns stemming from the Iran war might cap any meaningful JPY move up.
• The BoE’s hawkish outlook underpins the GBP and backs the case for some upside for the pair.

The GBP/JPY cross holds steady above the 213.00 mark during the Asian session on Thursday and remains close to a one-month peak, retested earlier this week. Moreover, the fundamental backdrop seems tilted in favor of bullish traders and suggests that the path of least resistance for spot prices is to the upside.

Investors remain worried that the war-driven surge in energy prices would weigh on Japan's economic outlook and drive up inflationary pressures. This increases the risk of a "stagflationary" environment and might complicate the Bank of Japan's (BoJ) normalization efforts. The outlook, in turn, has been a key factor behind the Japanese Yen's (JPY) recent underperformance and continues to act as a tailwind for the GBP/JPY cross.

Meanwhile, BoJ Governor Kazuo Ueda said on Tuesday that he expects underlying inflation to accelerate moderately and added that he will guide monetary policy appropriately to stably achieve the inflation target, accompanied by wage gains. The JPY fails to gain any respite from Ueda's hawkish comments amid economic concerns stemming from the Middle East conflict, though bears seem hesitant on the back of rising intervention fears.

In fact, Japan’s Vice Finance Minister for International Affairs and top foreign exchange official, Atsushi Mimura, said earlier this week that the government might consider taking measures on all fronts in foreign exchange (FX) volatility. Apart from this, the lack of any meaningful buying interest around the British Pound (GBP), amid a bullish US Dollar (USD), contributes to keeping a lid on any meaningful upside for the GBP/JPY cross.

That said, the UK Consumer Price Index (CPI) released on Wednesday reaffirmed the Bank of England's (BoE) hawkish tilt and could act as a tailwind for the GBP. In fact, the BoE signaled last week a potential interest rate hike as early as April amid inflation fears. This, along with the underlying bearish sentiment surrounding the JPY, validates the near-term positive outlook and backs the case for an extension of over a one-month-old uptrend.