- Increasing odds of a majority for Conservatives continue to underpin the GBP.
- Renewed US-China trade optimism undermined the JPY and remained supportive.
The buying interest surrounding the British pound remained unabated at the start of a new trading week and lifted the GBP/JPY cross further beyond the 141.00 handle, or near one-month tops.
The cross added to the previous session’s positive move and continued gaining some follow-through traction through the early European session on Monday in the wake of increasing chances of a majority for the ruling Conservative party at the upcoming UK snap election on December 12.
UK politics/US-China trade optimism supportive
Given that the incoming polls have been indicating a majority for Conservatives, the fact that the Brexit party on Friday decided to step down from closely contested Labour-held seats further increased the odds and continued underpinning demand for the British Pound.
This coupled with the latest positive trade-related developments boosted the global risk sentiment. The same was evident from a bullish trading sentiment around equity markets, which weighed on traditional safe-haven currencies – including the Japanese yen – and remained supportive.
In the latest development, Chinese state media Xinhua reported that the two countries had “constructive talks” on trade in a high-level phone call on Saturday. This comes on the back of the recent comments by US officials that they were close to securing a trade deal with China and revived hopes for a partial US-China trade deal.
With Monday’s positive move, the cross now seems to have confirmed a bullish breakthrough a multi-week-old trading range. Hence, a subsequent move beyond October monthly swing highs, around mid-141.00s, now looks a distinct possibility.
Technical levels to watch
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