GBP/JPY slides back beneath 140.00 as traders await Brexit update

• GBP/JPY has slid back from earlier highs north of the 140.00 level to consolidate around 139.50.
• The pair still trades in the green, however, as traders await the outcome of Brexit talks between Johnson and von der Leyen

GBP/JPY surged as high as the 140.30s on Wednesday, aided by positive comments from UK Cabinet Minister Michael Gove who intimated that a compromise of the issue of fisheries might be possible. However, GBP softened during US trading hours amid a bout of profit-taking, as well as a dose of realism that Brexit talks remain in the balance, with numerous EU officials saying that the chances of a deal are slim over recent days. The pair slipped back beneath 140.00 and has since consolidated about the 139.50 mark, where it currently trades heading into the Wednesday FX market close.

Johnson/von der Leyen talks still going

More than two and half hours in, UK PM Boris Johnson and EU Commission President von der Leyen’s diner, during which the two are currently discussing the way forward in Brexit negotiations, is still ongoing.

Whether this is a good sign that they will soon be able to announce some kind of meaningful breakthrough in the talks, or is a sign of the ongoing difficulties the two sides still face, is yet to be known.

But GBP traders are primed to react; good news in the form of a major breakthrough towards a deal will be greeted with jubilation and GBP will get a boost. Mind you, any concessions made by von der Leyen will have to also be palatable to the French, who have been taking a tough stance on negotiations and threatened to veto any deal that gives too much away to the Brits.

Meanwhile, if the conclusion of talks is to continue negotiations into the weekend, the reaction is likely to be muted as this is currently the markets base case scenario. If in an unlikely scenario talks see a complete breakdown, with Johnson and von der Leyen coming away from the meeting with the conclusion that a free trade deal is not possible, GBP will be slammed.