Search ForexCrunch
  • A combination of factors prompted some fresh selling around GBP/JPY on Tuesday.
  • The cautious mood underpinned the safe-haven JPY and exerted some pressure.
  • Vaccine jitter weighed on the sterling and contributed to the intraday selling bias.
  • UK employment details failed to impress bulls or provide any meaningful impetus.

The GBP/JPY cross maintained its offered tone through the early European session, albeit has managed to recover few pips from daily swing lows. The cross was last seen trading just above mid-150.00s, down for the fourth consecutive session.

The cross struggled to capitalize on the previous day’s strong rebound from two-week lows, instead met with some fresh supply on Tuesday and was pressured by a combination of factors. Investors turned cautious after the US, Canada, UK and EU – in a rare, coordinated move – imposed sanctions on Chinese officials over human rights violations in Xinjiang. This, in turn, drove some haven flows towards the Japanese yen and prompted selling around the GBP/JPY cross.

On the other hand, the British pound remained depressed on the back of the overnight reports that the European Union is set to block exports of Oxford-AstraZeneca vaccines to the UK. A significant shortage in vaccine supplies could derail the UK government’s plan to exit the current lockdown and dampen prospects for a swift economic recovery. This was seen as another factor that exerted some additional downward pressure on the GBP/JPY cross.

The sterling found some support following the release of the monthly UK jobs report, which showed that the unemployment rate unexpectedly dropped to 5% in January. Consensus estimates were pointing to a modest uptick to 5.2% from 5.1%. The positive reading, to a larger extent, was offset by a Jump in the number of people claiming unemployment-related benefits to 86.6K as against the 20.8K decline recorded in the previous month and traders from placing bullish bets around the GBP/JPY cross.

Market participants now look forward to scheduled speeches by the BoE Governor Andrew Bailey and Deputy Governor Jon Cunliffe, which might influence the pound. Apart from this, the broader market risk sentiment will further contribute to produce some meaningful trading opportunities around the GBP/JPY cross.

Technical levels to watch