GBP/JPY struggles for direction, stuck in a range above 151.00 mark

• GBP/JPY extended its sideways consolidative price action through the mid-European session.
• The UK political turmoil weighed on the British pound and kept a lid on any meaningful upside.
• Dovish BoJ outlook continued undermining the JPY and helped limit the downside for the cross.

The GBP/JPY cross lacked any firm directional bias and remained confined in a narrow trading band, above the 151.00 mark through the mid-European session.

A combination of diverging factors failed to assist the cross to capitalize on a three-day-old uptrend and led to a subdued/rangebound price action on Wednesday. The GBP/JPY cross, for now, seems to have stalled its recent bounce from the vicinity of 149.00 mark, or one-month lows touched last Friday.

The British pound's relative underperformance comes amid the controversy over funding arrangement for Prime Minister Boris Johnson's official apartment. The UK political turmoil overshadowed the optimism over the gradual reopening of the UK economy and capped any meaningful gains for the GBP/JPY cross.

On the other hand, the Japanese yen was weighed down by concerns that the recent surge in COVID-19 cases could hinder Japan's fragile economic recovery. The concerns were acknowledged by the Bank of Japan on Tuesday, warning of high uncertainty about the potential economic fallout from the pandemic.

Adding to this, the BoJ revised its forecast for domestic inflation, which is not expected to reach the 2% target through early 2023. This, in turn, further acted as a headwind for the JPY, which extended some support to the GBP/JPY cross and helped limit the downside, at least for the time being.

That said, worries that soaring coronavirus cases in some other countries could derail the global economic recovery from the pandemic weighed on investors' sentiment. This was seen as another factor that further held traders from placing any aggressive directional bets around the GBP/JPY cross.

Technical levels to watch