• GBP/JPY bulls pause for a breather following the overnight sharp rally to a fresh multi-year high.
• Intervention fears lend support to the JPY and cap the cross, though the downside seems limited.
• Easing UK political uncertainty and fiscal concerns favor bulls amid the wide UK-Japan rate gap,

The GBP/JPY cross enters a bullish consolidation phase following the previous day's blowout rally and oscillates in a range near mid-219.00s through the early European session on Thursday. Meanwhile, the constructive fundamental backdrop suggests that the path of least resistance for spot prices remains to the upside.

The British Pound (GBP) draws support from easing UK political uncertainty and growing optimism over the UK's fiscal outlook amid expectations that the incoming Prime Minister, Andy Burnham, will pick a fiscally conservative finance minister. Adding to this, the persistently wide interest rate differential between the UK and Japan contributes to the JPY's relative underperformance against its Japanese counterpart.

The Bank of England's (BoE) base rate sits at 3.75%. The Bank of Japan (BoJ), on the other hand, raised the short-term policy rate in June to 1% or, the highest level since 1995. This, however, still leaves an approximate gap of 275-basis-points (bps) and keeps the so-called carry trade active, which has been a key factor behind the Japanese Yen's (JPY) underperformance and acts as a tailwind for the GBP/JPY cross.

Meanwhile, the GBP moves little following the release of the monthly UK GDP print, which showed that the economy grew by 0.1% in May after contracting at a similar pace in the previous month. Separately, the UK Industrial Production data fell short of expectations and contracted 0.5% in May versus a 0.2% rise prior, while Manufacturing Production increased by 0.1% during the reported month, higher than 0.2% forecasted.

That said, traders remain on high alert that Japanese authorities will step in to prop up the domestic currency. This, in turn, holds back the JPY bears from placing aggressive bets and caps the upside for the GBP/JPY cross amid a slightly overbought RSI on the daily chart. Nevertheless, the aforementioned supportive factors suggest that any corrective pullbacks might be seen as a buying opportunity and remain cushioned.