GBP/JPY holds steady above 213.00 after UK Retail Sales; JPY intervention fears cap gains

• GBP/JPY attracts some dip-buyers on Friday, though it lacks bullish conviction amid mixed cues.
• The GBP draws support from the hawkish BoE outlook and moves little after the UK Retail Sales.
• Intervention fears act as a tailwind for the JPY and keep a lid on further upside for spot prices.

The GBP/JPY cross reverses an intraday dip to the 212.60-212.55 region on Friday and climbs to a fresh daily high during the early European session. Spot prices hold steady around the 213.00 mark following the release of the UK macro data and remain close to the highest level since February 10, touched the previous day.

Data published by the UK Office for National Statistics (ONS) showed that monthly Retail Sales declined 0.4% MoM in February, compared to the 0.8% fall anticipated. Adding to this, the previous month's reading was revised up to show a growth of 2%, up from 1.8% reportedly originally. The key consumer spending report, however, does little to provide any impetus to the British Pound (GBP), though the Bank of England's (BoE) hawkish outlook continues to act as a tailwind for the GBP/JPY cross.

In fact, the BoE signaled last week a potential interest rate hike as early as April amid inflation fears stemming from the Iran war. Meanwhile, the Bank of Japan (BoJ) released ‌an updated estimate on the natural rate of interest, which is seen in ‌a range of around -0.9% to +0.5%, compared with the previous estimate of -1.0% to +0.5%. Investors, however, remain worried that the war-driven surge in energy prices would weigh on Japan's economic outlook and complicate the BoJ's normalization efforts.

Furthermore, a sustained increase in Crude Oil prices would reignite inflationary pressures and create a classic stagflationary environment. This is seen undermining the Japanese Yen (JPY) and acting as a tailwind for the GBP/JPY cross. The JPY bears, however, seem reluctant to place aggressive bets amid speculations that authorities might step in to stem further weakness in the domestic currency. This, in turn, warrants some caution before positioning for any further gains for the currency pair.