- GBP/JPY built on the previous day’s bounce from weekly lows, near mid-154.00s.
- Hawkish remarks by BoE’s Haldane provided a modest lift to the British pound.
- Brexit Jitter, COVID-19 woes, the cautious mood might cap gains for the cross.
The GBP/JPY cross edged higher during the early European session and refreshed daily tops, around the 155.15 region in the last hour, albeit lacked follow-through.
The cross built on the previous day’s goodish bounce of around 50 pips from the vicinity of weekly lows, around the 154.55 region and gained some follow-through traction on Wednesday. The uptick was exclusively sponsored by a modest pickup in demand for the British pound, which got an additional boost after the Bank of England Chief Economist, Andy Haldane’s hawkish comments.
Haldane noted that the UK economy is going gang-busters and there may be the need to start turning off the stimulus tap. We need not become too dependent on monetary medicine and could ultimately start to turn QE around. Already seeing some pretty punchy pressures on prices. If pay and costs are picking up, inflation on the high street isn’t very far behind, Haldane added further.
The upside, however, is likely to remain capped, at least for the time being. EU-UK collision over Norther Ireland protocol and talks that further easing of lockdown measures in the UK may be postponed could continue to act as a headwind for the sterling. This, along with a cautious mood, extended some support to the safe-haven Japanese yen and might hold bulls from placing aggressive bets.
It is worth reporting the European Union warned of a swift and firm action if the UK fails to honour its commitments under the divorce deal. The two sides are due to hold talks on Thursday to resolve differences over the deal. There are also speculations that the UK may delay plans to end restrictions fully on June 21 in light of the spread of the so-called Delta variant.
From a technical perspective, the recent price action constitutes the formation of a bullish flag pattern on short-term charts. This, in turn, supports prospects for additional gains. That said, it will be prudent to wait for some strong follow-through buying before positioning for any further appreciating move amid absent relevant market moving economic releases.
