- GBP/JPY witnessed a modest pullback from two-week tops, snapping four days of winning streak.
- Brexit anxieties prompted some long-unwinding around the GBP and exerted downward pressure.
- Reviving safe-haven demand benefitted the Japanese yen and added to the intraday selling bias.
The GBP/JPY cross was seen hovering near the lower end of its daily trading range, with bearish traders now eyeing a sustained break below the 139.00 mark.
The cross struggled to capitalize on its recent positive move to two-week tops and started retreating from the vicinity of the 140.00 psychological mark. The GBP/JPY cross continued losing ground through the mid-European session on Thursday and for now, seems to have snapped four consecutive days of winning streak.
Brexit anxieties prompted some long-unwinding around the British pound, which, along with reviving demand for the safe-haven Japanese yen, exerted some downward pressure on the GBP/JPY cross. Comments by the British finance minister, Rishi Sunak, saying that he remains hopeful that a deal can be reached, failed to impress bulls.
It is worth reporting that negotiators are yet to find a compromise on key sticking points – the so-called level playing field, fisheries and state-aid rules. With very little time left before the Brexit transition periods end on December 31, the deadlock seemed to have tempered the recent optimism for a last-minute Brexit deal.
Concerns about a no-deal Brexit resurfaced after the UK Prime Minister Boris Johnson reiterated that the UK’s position on fisheries hasn’t changed and that they will not ask for additional time to negotiate the trade deal with the European Union. Separately, the European Commission president, Ursula van der Leyden said that the disagreement over access to Britain’s fishing waters continues to block progress.
On the other hand, the safe-haven Japanese yen benefitted from a softer tone surrounding the US equity markets. As markets digested the progress towards the development of a potential vaccine for the highly contagious coronavirus disease, investors opted to take some profits off the table following the recent strong bullish run up.
It will now be interesting to see if the GBP/JPY cross is able to find any support at lower levels or a sustained break below the 139.00 mark sets the stage for a further near-term depreciating move. That said, the incoming Brexit-related headlines will continue to play a key role in influencing the GBP and warrants some caution before placing aggressive directional bets.