- GBP/JPY bears taking back control on dubious trade negotiations.
- Cross is likely to suffer heavy supply as investors seek a safe-haven.
GBP/JPY has been capped in the 143 handle to start the week with bears taking advantage of thin markets with the majority of traders out on holidays in preparation for New Year celebrations. The range has stuck to a 30 pip narrow move to a low of 143.06 so far.
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China ‘will honour’ US trade war deal promises as talks progress ‘in earnest’ – SCMP
Looking elsewhere, we had some weekend headlines which have done little to stir-up any reaction, but there remains a focus on the US and Chinese trade deal in the making. The Soth China Morning Post is reporting that the Chinese will follow through with the nation’s promises and respect the agreements, which should be a risk-on factor for the sessions ahead, underpinning the notion and sentiment that a phase-one deal will be signed in a ceremony in coming weeks.
Elsewhere, markets are awaiting the return of PM Boris Johnson and his Brexiteers for the next stages in the saga. The latest, as a re-cap, was that on the 2th0 December 2019, MPs voted 358 to 234 – a majority of 124 – in favour of the Withdrawal Agreement Bill, which now goes on to further scrutiny in Parliament. Assuming the European Parliament also gives the green light, the UK will formally leave the EU on 31 January with a withdrawal deal. However, Johnson has been adamant that the UK will not request an extension to the transition by the end of 2020 which has raised the prospects of a hard Brexit again, weighing heavily on the pound which has given up all of its UK election gains and some.
GBP/JPY at risk on breakdowns in trade negotiations
Should the Brexit and US/Sino trade tensions take the front-page headlines on a negative spin, the cross is likely to suffer heavy supply as investors seek a safe-haven into the first half of the year. Indeed, while a phase-one deal is in the making, there are plenty of doubts that it can be plain sailing from here as the more thorny negotiations are yet to come.
GBP/JPY levels
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