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  • The overnight Brexit optimism continues to underpin the British Pound.
  • The reaction to Wednesday’s softer UK PMI turns out to be short-lived.
  • Fading safe-haven demand weighed on the JPY and remains supportive.

The GBP/JPY cross quickly reversed the UK services PMI-led dip and climbed to fresh weekly tops – around the 129.30 region in the last hour.
The cross gained strong follow-through traction through the early European session on Wednesday and built on the previous session’s solid recovery of over 130-pips – supported by the fact that the UK House of Commons passed a motion aimed at taking control of the daily agenda from the government.

Brexit optimism offset softer UK data

The cross did witness an intraday pullback following the disappointing release of UK services PMI, which fell to 50.6 in August from the previous month’s final reading of 51.4, though the downtick turned out to be short-lived amid receding fears over Britain’s exit from the EU without a deal.
It is worth mentioning that the latest UK political development is now expected to lead to a vote forcing the government to request another three-month extension to the Brexit deadline, though looming risk of a snap election in the UK might keep a lid on any strong follow-through positive momentum.
Meanwhile, a fresh wave of global risk-on trade – as depicted by a strong rally in equity markets – was seen weighing on the Japanese Yen’s perceived safe-haven status and remained supportive of the pair’s ongoing recovery further beyond the 129.00 round figure mark.

Technical levels to watch