GBP/JPY slides to mid-148.00s, eyeing monthly lows

• GBP/JPY extended its recent decline and dropped back closer to monthly lows on Wednesday.
• The prevalent risk-off mood benefitted the safe-haven JPY and exerted some heavy pressure.
• Softer UK CPI figures did little to provide any respite to bulls or lend any support to the cross.

The GBP selling picked up pace in reaction to softer UK consumer inflation figures and dragged the GBP/JPY cross to mid-148.00s, back closer to monthly lows.

The cross added to the previous day’s heavy losses and drifted lower through the first half of the trading action on Wednesday. The prevalent risk-off mood was seen as one of the key factors that benefitted the Japanese yen’s safe-haven status. This, along with the offered tone surrounding the British pound further contributed to the GBP/JPY pair’s ongoing retracement slide from near three-year tops touched on March 18.

The sterling was further pressured by concerns that a significant shortage in vaccine supplies could derail the UK government’s plan to exit the current lockdown and hinder economic recovery. It is worth mentioning that the EU reportedly could block exports of Oxford-AstraZeneca vaccines to the UK. The GBP/JPY cross lost some additional ground following the release of UK CPI print, which came in to show a modest 0.1% MoM rise in February.

The headline reading was well below the 0.5% increase anticipated. Adding to this, the yearly rate also missed market expectations and edged down to +0.4% from 0.7% previous. The softer inflation figures failed to impress the GBP bulls or lend any support to the GBP/JPY cross, instead seems to have set the stage for further weakness. A subsequent slide below monthly swing lows, around the 148.10 region will reaffirm the bearish outlook.

Wednesday’s UK economic docket also features the release of flash Manufacturing and Services PMI for March. This, along with the broader market risk sentiment, will influence the safe-haven JPY and produce some meaningful trading opportunities around the GBP/JPY cross.

Technical levels to watch