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  • GBP/JPY edges higher, keeps the previous day’s bounce off weekly low.
  • Japan PM Suga is up for snap election in autumn, new stimulus package is in the pipeline before that.
  • Downbeat Treasury yields battle mixed UK headlines but buyers stay hopeful amid receding inflation fears.

GBP/JPY portrays a sideways grind above 155.00, around 155.25 by the press time of Thursday’s Asian session. Even so, the cross-currency pair keeps the previous day’s recovery moves amid downbeat Treasury yields

Global central bankers, including those from the US Federal Reserve, have been struggling to reject the inflation fears, not to forget tapering. Their efforts seem to have convinced traders of late and helped improve the market sentiment, exerting downside pressure on the US 10-year Treasury yields.

It should, however, be noted that the cautious sentiment ahead of Friday’s key US employment data and mixed catalysts from Japan and the UK offers a sluggish move to the GBP/JPY despite having a negative correlation with Treasury yields.

Recently, Reuters came out with the news, quoting Japan’s Asahi Newspaper, saying, “Japanese Prime Minister (PM) Yoshihide Suga is likely to call a snap election in autumn after the Tokyo Olympic and Paralympic Games.” The news added, “The government is considering crafting a new economic stimulus package before the expected snap election.”

On the other hand, UK PM Boris Johnson seems to be worried over his late June deadline to remove all virus-led activity restrictions as the Indian covid variant is spreading faster in the nation. Though, the BBC quotes UK Health Secretary Matt Hancock saying, “There was nothing in the data to suggest the UK was ‘definitively off track’. Three in four UK adults had now received one dose of a coronavirus vaccine.”

Alternatively, Brexit flashed negative signs as The Independent said, “Boris Johnson’s Brexit Minister David Frost has said trade arrangements for  Northern Ireland  previously agreed with the EU are not ‘sustainable’ in their current form.  Lord  Frost  also called on Brussels chiefs to show more ‘common sense’ to help find practical solutions to the problems arising from the  Northern Ireland Protocol.”

Against this backdrop, S&P 500 Futures search for clear direction after a mildly positive Wall Street close whereas the US Treasury yields dropped 2.6 basis points (bps) to 1.58% by the end of Wednesday’s trading.

Moving on, the UK’s final reading of Services PMI for May, expected to confirm 61.8 initial forecast, may decorate the calendar, as well as Japan’s Jibun Bank Services PMI for the said month, prior 49.5. In addition to the scheduled data, quiet macro and cautious ahead of Friday may also restrict short-term GBP/JPY moves.

Technical analysis

Unless breaking below May 18 top surrounding 154.80, GBP/JPY is capable of challenging the previous month high, also the highest since early 2018, near 156.10.