Market news

26 November 2021

GBP/JPY: Bears dominate in full swing below 153.00 on Brexit, covid chatters

  • GBP/JPY remains pressured near two-week low after declining the most since last Friday.
  • French fishermen ready to bloc Tunnel over licence row, EU’s Šefčovič is in London to discuss NI border issues.
  • South African variant propels market’s rush to risk safety, Moody’s rating, Japan data adds strength to JPY.
  • Brexit, coronavirus headlines become the key for fresh impulse.

GBP/JPY licks its wound around 152.70, after dropping the most in a week to refresh fortnight low with 152.47 ahead of Friday’s London open. The cross-currency pair witnessed the double-whammy attacks amid coronavirus fears and the Brexit woes while pleasing the bears.

French fishermen are ready to block the Channel Tunnel and major ports on Friday to mark their disappointment from the British fishing licensing rules. The UK government has already urged the policymakers to not use illegal means but the same is less likely to stop the French outrage.

On the positive side, the London visit of EU’s Brexit officer Maroš Šefčovič may please the British diplomats should the parties agree over the Northern Ireland (NI) border protocol that shows positive progress of late.

It’s worth noting that the Bank of England (BOE) Governor Andrew Bailey’s rejection of inflation fears the previous day cuts the rate hike odds and weighs on the GBP/JPY prices as well.

Alternatively, Japan’s recent unlock and Moody’s rating outlook joins firmer inflation data to help the yen gain more. Japan’s Chief Cabinet Secretary Hirokazu Matsuno said, per Reuters, “If any new coronavirus variants are identified we will reconsider our border controls as needed.” “Stable outlook on Japan reflects moody's view that japan's fundamental economic and institutional strengths will support the recovery,” said the global rating agency Moody’s in its latest rating update.

Talking about data, Japan’s Tokyo Consumer Price Index (CPI) data for November jumped to 0.5% versus 0.1% prior on a YoY basis while the CPI ex Fresh Food eased from 0.4% market forecast to 0.3%, compared to 0.1% prior. Further, the CPI ex Food, Energy matched -0.3% expectations on the yearly basis.

Elsewhere, fears that the Fed’s rate hike will be delivered at the wrong time weigh on the market sentiment and underpin the US dollar’s safe-haven demand. That said, the covid-19 woes spread outside the initial fear-zone of Europe on concerns relating to the variant, with a formal name of B.1.1.529, which is linked to South Africa and is immune to the vaccines. For the same, the World Health Organization (WHO) and UKHSA have called for special meetings on Friday.

While portraying the mood, the US 10-year Treasury yields drop eight basis points (bps) to 1.565%, extending Wednesday’s pullback from the monthly peak whereas the S&P 500 Futures mark 1.0% downside at the latest.

Moving on, risk catalysts are likely to keep the driver’s seat amid a light calendar.

Technical analysis

200-DMA restricts short-term GBP/JPY downside around 152.50, a clear break of which becomes necessary for the bears to keep controls. Otherwise, a corrective pullback towards breaking the 20-DMA level near 153.80 can’t be ruled out.

 

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Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

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