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GBP/JPY: Bulls and bears jostle over trade/political headlines around 143.00

  • GBP/JPY recovers after the gap down opening.
  • Rising odds of BOE’s rate cut, Brexit-negative news join risks emanating from Iran.
  • US-China trade optimism curbs the pair’s declines.

Following its gap down opening at the week’s start, GBP/JPY bounces off to 142.90 during the Asian session on Monday. The early-day drop seemed to have taken bearish clues from the BOE member’s signal of further rate cuts whereas upbeat trade sentiment has recently brushed off Brexit-negative headlines off-late.

During the weekend, BOE’s member Gertjan Vlieghe supported the calls of easy money among the UK’s central bank. The Monetary Policy Committee (MPC) member said that he would vote in favor of a looser monetary policy during the late-January meeting. During the last week, the BOE’s Governor Mark Carney also supported the need for further rate cuts and triggered the British pound’s (GBP) declines.

Elsewhere, the Irish Deputy Prime Minister Simon Coveney recently crossed wires while saying that the European Union would not be rushed in negotiations with Britain. This joins the anti-Brexit mood out of the UK as noted from the latest comments by EU’s chief Brexit negotiator and European Council President. Also signaling downside risk is Iran’s arrest of the UK’s ambassador to Tehran. The action got widespread criticism from the UK, the US and the EU.

On the positive side, optimism surrounding the phase-two deal of the US-China and the upcoming US-EU trade talks limit the safe-haven demand of the Japanese yen (JPY). It’s worth mentioning that the US diplomats will reach the UK and push them for the Huawei 5G ban.

With this, S&P 500 Futures stay modestly changed to 3,270 with 0.10% gains.

Considering the Coming-of-Age Day holiday in Japan, the pair is likely to remain silent ahead of the UK markets open. The UK’s Manufacturing Production, Industrial Production and Gross Domestic Product (GDP) for November, coupled with trade/political headlines, will entertain traders during the rest of the day.

Technical Analysis

Unless providing a daily closing below 50-day EMA level of 141.63, the quote is less likely to revisit monthly low surrounding 140.80, needless to mention about 140.00 round figure. The same increases the odds for the pair’s gradual recovery towards the early-month top near 144.


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