Blog: GBP/JPY: Steady around 152.00 despite Brexit, coronavirus woes, BOJ eyed – FXStreet

  • GBP/JPY fluctuates near weekly low after three-day downtrend.
  • Britain sees £3.5 billion gap on Brexit divorce bill, EU’s von der Leyen to visit Northern Ireland over protocol issue.
  • UK PM Johnson backs July 19 unlock despite six-month high infections, Tokyo’s daily count jumps to January levels.
  • BOJ is expected to keep monetary policy unchanged, economic outlook becomes the key.

GBP/JPY bears take a breather around 152.00, up 0.05% intraday near 151.90 by the press time of Friday’s Asian session. The cross-currency pair dropped for three consecutive days the last as the market’s risk-off mood put a safe-haven bid under the Japanese yen (JPY).

Trading sentiment remains downbeat as the virus concerns keep poking the optimism. The UK marked over 50,000 cases to refresh, unfortunately, the highest infections since January whereas Tokyo also registered 1,308 cases, per Kyodo News, to revisit the January 21 highs. Even so, UK PM Boris Johnson said, per Independent, that it was “highly probable” the worst of the pandemic is over.

Other than covid concerns, Brexit woes also weigh on the GBP/JPY prices. While looming doubts over the Northern Ireland (NI) protocol and fishing are yet to be solved, the UK diplomats’ calculation of post-Brexit financial settlement’s present value surrounding £37.3 billion raises another tussle between the European Union (EU) and the UK. It should be noted that the European Commission President Ursula von der Leyen will travel to Dublin on Friday and meet Irish Taoiseach Micheál Martin to discuss many issues including NI protocol. It’s worth mentioning that a story from The Times, signaling UK PM Johnson’s support to a new tax system to pay for reforms in the social cares add to the pair traders worries.

Furthermore, the fresh US-China tension and the pair traders’ cautious sentiment during the pre-BOJ period also weigh on the quote. Recently, Reuters signaled new US sanctions on Chinese diplomats whereas the Financial Times (FT) cited Beijing’s rejection of the Sino-American diplomat’s meeting to highlight the Sino-American tussles.

Alternatively, the UK’s House of Lord’s push to the Bank of England (BOE) to tame the inflation, per FT news, seems to put a limit under the lows.

On the data front, UK registered a higher Unemployment Rate for three months to May and a slower reduction in the Claimant Count Change the previous day. Before that, inflation figures did favor the need for hawkish BOE.

Amid these plays, stock futures and US Treasury yields remain pressured by the press time.

Hence, GBP/JPY traders will keep their eyes on the Bank of Japan (BOJ) meeting for fresh impulse but the risk catalysts are the key to watch. The BOJ’s likely status-quo requires the pair buyers to watch details of the economic outlook for extra support.

Read: BOJ Preview: Yen has room to (temporarily) fall on downgraded outlook, worrying virus state

Technical analysis

Although sluggish RSI and an upward sloping Momentum line suggest a corrective pullback of the GBP/JPY prices, 100-DMA level of 152.46 becomes a nearby key hurdle to watch. Alternatively, a descending trend line from June 21, near 150.40, can lure the pair sellers.

 

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