On Friday, GBP/JPY saw some follow-through selling for the second day in a row.
COVID- Dovish BoE
The British pound was weighted down by 19 jitters, which put some pressure on it.
The risk-on environment weakened the safe-haven JPY, which may help limit future losses.
On Friday, the GBP/JPY cross continued the previous day’s rejection drop from around the 154.00 area, edging down for the second straight session. The cross was last seen lingering around the 153.30-25 zone, towards the bottom end of its intraday trading range.
The British pound was dragged down by Governor Andrew Bailey’s overnight dovish comments, in which he stated that the central bank should not overreact to temporarily high inflation. The sterling faced a headwind as a result of this, as well as concerns over the spread of the more contagious Delta version of the coronavirus.
The safe-haven Japanese yen, on the other hand, continues to be undercut by the underlying positive tone in financial markets, which was exacerbated by prolonged US dollar purchasing. This, in turn, may deter traders from making risky bets, limiting any additional losses for the GBP/JPY cross, at least for the time being.
The GBP/JPY cross has now reversed a large portion of the recovery gains achieved on Wednesday, and it is on track to fall even more. In the absence of any big market-moving economic releases, market volatility caused by the US NFP could influence the cross and create some short-term trading opportunities./n
