- GBP/JPY was seen oscillating in a narrow trading band through the first half of the trading action.
- Stronger UK Retail Sales added credence to the upbeat economic outlook and underpinned the GBP.
- Brexit-related uncertainties held bulls from placing aggressive bets and capped gains ahead of PMIs.
The GBP/JPY cross lacked any firm directional bias and remained confined in a range, around the 154.30 region heading into the European session.
The cross struggled to capitalize on the previous day’s goodish rebound of around 80 pips from the vicinity of weekly lows and witnessed a subdued/range-bound price action on the last day of the week. The upbeat UK economic outlook – bolstered by the gradual easing of lockdown measures – continued acting as a tailwind for the British pound.
In fact, the UK Prime Minister Boris Johnson said on Tuesday that there is nothing conclusive yet to indicate that the Indian variant would force Britain to deviate from its plan to end restrictions fully on June 21. The optimism was further reinforced by Friday’s better-than-expected UK Retail Sales figures for the month of April.
The headline sales came in to show robust growth of 9.2% during the reported month as against consensus estimates pointing to a 4.5% increase. The core retail sales (excluding the auto motor fuel sales) also surpassed market expectations and rose 9% MoM. On an annualized basis, sales jumped 42.4% during the reported month versus 7.2% prior.
On the other hand, a generally positive tone around the global equity markets undermined demand for the safe-haven Japanese yen. This was seen as another factor that extended some support to the GBP/JPY cross. That said, the uncertainty over the post-Brexit agreement on Northern Ireland held bulls from placing aggressive bets and capped the upside.
Market participants now look forward to the release of flash UK PMI prints for May, which will play a key role in influencing the sterling and produce some trading opportunities. Looking at the technical picture, the GBP/JPY cross pair has been oscillating in a broader trading range over the past one week or so, warranting caution for aggressive traders.
Technical levels to watch
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