- GBP/JPY advanced to its highest level in 14 months on Tuesday.
- Risk-averse market environment helps JPY find demand on Wednesday.
- BoE’s Ramsden says they are not looking to unwind gilt purchases any time in near future.
The GBP/JPY extended its rally and touched its highest level since December 2019 at 147.47 on Tuesday. However, safe-haven flows helped the JPY gather strength on Wednesday and forced the pair to stage a correction. As of writing, the pair was down 0.48% on the day at 146.70 and was on track to snap its three-day winning streak.
JPY capitalizes on safe-haven flows
The poor performance of major global equity indexes provided a boost to the JPY earlier in the day. Additionally, the sharp decline seen in the US Treasury bond yields allowed the bearish momentum to remain intact in the second half of the day. At the moment, the S&P 500 is down 0.3% on the day and the 10-year US T-bond yield is losing 2%.
The data from the UK showed on Wednesday that the Core Consumer Price Index in January remained unchanged at 1.4% on a yearly basis.
Meanwhile, Bank of England (BoE) Deputy Governor Dave Ramsden dovish comments caused the GBP to remain on the back foot. Ramsden said that they are not going to be thinking about unwinding gilt purchases any time in the near future. “We will need strong evidence of sustained progress to using up spare capacity, inflation returning to target, before tightening policy,” he further added.
There won’t be any significant macroeconomic data releases from Japan nor the UK on Thursday and the risk perception is likely to continue to impact GBP/JPY’s movements.
Technical levels to watch for
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