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  • GBP/JPY defies the previous day’s losses while taking a U-turn from 134.05.
  • Ireland expects Brexit deal in October, Germany’s Merkel less likely to help.
  • China attacks the UK over the Huawei ban, Russia dislikes the first independent British sanctions for human rights violations.
  • BOE’s Bailey postpones meeting with Tory policymakers as UK Chancellor Sunak is ready to step forward in combating the coronavirus.

GBP/JPY eases from intraday high of 134.32 to 134.18, up 0.08% on a day, during the early Tuesday in Asia. The quote recently gained upside momentum after market sentiment extended the previous day’s positivity. Even so, fears of the coronavirus (COVID-19) outbreak and Brexit talks, not to forget global fight against China, keep the optimism guarded.

With no fresh virus cases from Beijing, the first time since June 11, global markets escalated the earlier risk-on mood. Also supporting the upbeat trading environment could be the expectations of further stimulus from the UK’s Chancellor Rishi Sunak during his Wednesday’s speech. Additionally, Global Times’ (GT) news suggesting China’s vaccine heading for the third trial in Brazil also favored the bulls.

On the contrary, the US pandemic data suggests a daily rise of 2.0% on Monday versus the seven-day average of 1.8%. Further, the UK’s sanctions on major Russian and Saudi Arabian diplomats over the human rights violations get a bitter response from Moscow whereas China criticized British PM Boris Johnson over the ban on Huawei. Additionally, the EU-US trade tussle and the Sino-America tension are some extra points that question the present risk-on momentum.

While portraying the mood, the US 10-year Treasury yields seesaw around 0.68% but the S&P 500 Futures gain 0.20% to 3,179. Moving on, Japan’s Nikkei 225 drops 0.33% to 22,640 as virus figures from Tokyo rose above 100, to 106, for the fifth day in a row.

Looking forward, the Brexit talks between the European Union (EU) and the UK diplomats in London become the key to watch following the abrupt end of talks in Brussels during the last week. Although the Irish policymaker Simon Coveney suggests a trade deal by October, the UK express relies on the German news newspaper Augsburger Allgemeine to claim that such a view is a “misconception” and warns the country will not be the EU’s weak point.

Other than the Brexit headlines, preliminary readings of Japan’s May month Leading Economic Index, expected 73.2 versus 77.7 prior, could entertain the traders. It’s worth mentioning that virus updates and geopolitical headlines will also be the key to watch.

Technical analysis

A clear break of 100-day SMA level near 134.20 will need to be validated by Thursday’s top of 134.70 for a confirmation of further upside.