- GBP/JPY extended the overnight retracement slide from over two-month tops.
- Brexit uncertainties, softer UK macro data continued undermining the sterling.
- A softer risk tone benefitted the safe-haven JPY and added to the selling bias.
The GBP/JPY cross remained depressed below the 139.00 mark post-UK macro releases, albeit has managed to hold few from above the Asian session swing lows.
The cross extended the previous day’s retracement slide from the 140.30 region, or two-month tops and witnessed some follow-through selling for the second consecutive session on Thursday. The British pound was being weighed down by persistent Brexit-related uncertainties. This, along with a modest pickup in demand for the safe-haven Japanese yen, contributed to the offered tone surrounding the GBP/JPY cross.
Meanwhile, the GBP selling bias remained unabated following Thursday’s release of disappointing UK GDP figures, which showed that the economy expanded by 1.1% in September and 15.5% during the third quarter of 2020. The readings were below consensus estimates pointing to a growth of 1.5% MoM and 15.8% QoQ. Separately, the UK Manufacturing and Industrial Production data also fell short of market expectations.
On the other hand, concerns about the economic fallout from the ever-increasing coronavirus cases overshadowed the recent optimism over a potential vaccine for the highly contagious disease. This was evident from a softer tone around the global equity markets, which benefitted traditional safe-haven assets, including the JPY.
With Thursday’s key UK macro data out of the way, investors now look forward to a scheduled speech by the BoE Governor Andrew Bailey for some impetus. This, along with the incoming Brexit headlines, will play a key role in influencing the GBP price dynamics. Apart from this, the broader market risk sentiment should further contribute to produce some short-term trading opportunities around the GBP/JPY cross.
Technical levels to watch
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