- GBP/JPY probes a 5-day SMA hurdle, extending Monday’s rise.
- Markets ignore the economic cost of the UK’s fresh lockdown measures amid Brexit optimism.
The British pound is showing resilience to the UK’s decision to impose an economically-painful four-week coronavirus lockdown. The GBP/JPY pair is currently trading in the green near the 5-day simple moving average (SMA) at 135.35, having risen from 134.87 to 135.20 on Monday.
“We are fighting a disease. When the data changes, of course, we must change course too,” British Prime Minister Boris Johnson said in Parliament on Monday, while announcing the lockdown. Starting Thursday, non-essential shops, gyms, pubs, and places of worship will close and the government will re-evaluate the lockdown in December.
While the new restrictions look to be less severe than the ones initiated in the second quarter, still they could lead to a negative fourth-quarter economic quarter. So far, markets haven’t considered prospects of deeper economic slowdown and remain focused on expectations that European Union and UK negotiators would reach a deal to avert a chaotic year-end Brexit.
The Brexit optimism, coupled with the risk-on signaled by the uptick in the S&P 500 futures, could continue to draw bids for the pair. However, big gains are likely to remain elusive on account of caution ahead of the US elections.
Technical levels
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