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GBP/JPY bounces off multi-week low amid risk reset

  • GBP/JPY recovers from 20-week low as Asian equities register gains.
  • Expectations of further liquidity infusion seem to have favored fresh bids.
  • UK Services PMI, coronavirus and Brexit headlines are among the key catalysts to watch.

GBP/JPY recovers 0.21% losses to take a U-turn from the mid-October 2019 lows while trading around 137.60 ahead of the UK session on Wednesday. While the market’s fear from coronavirus (COVID-19) as well as no clarity of post-Brexit EU-UK trade terms keep weighing on the pair, the recent positive performance by the Asian equities seems to have helped the quote.

With larger than initially estimated coronavirus spread outside China, global policymakers are pushed to take emergency steps to avoid harsh economic implications. However, Asian nations are more titled towards fiscal stimulus than the west, which in turn helped share traders to portray the recent recovery. Also contributing to the market mood could be upbeat Aussie GDP.

Following that, MSCI’s index of Asia-Pacific shares outside Japan mark 0.86% gains whereas Japan’s NIKKEI rise 0.40% to 21,160 by the press time.

On the Brexit front, the EU-UK policymakers continue to jostle with the EU Chief Brexit negotiator Michel Barnier’s latest comments mentioning the talks as positive. Elsewhere, the UK Foreign Secretary Dominic Raab will head to Saudi Arabia today to push the Arab nation towards more acceptable human rights. Further, BOE policymakers showed a higher preference for fiscal measures over monetary policy moves while also terming coronavirus as disruption and not the destruction.

Moving on, the final readings of the UK Services PMI for February will act as the immediate catalyst whereas headlines concerning Brexit and coronavirus could keep the market players entertained.

Technical Analysis

The September 2019 top surrounding 135.75 will grab the bears’ attention once the pair closes below 137.00 on the daily chart. Meanwhile, any recovery below November 2019 low close to 140.55 seems to be tepid.

 

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