GBP/JPY stays pressured around 163.00, traces sluggish yields

• GBP/JPY remains depressed amid mixed clues, inactive markets.
• Yields seek fresh clues to consolidate Friday’s rally ahead of US inflation.
• UK politics, Brexit woes exert downside pressure amid dormant session.
• Hopes that Japan’s cabinet reshuffle won’t affect BOJ monetary policy test bears.

GBP/JPY remains mildly offered around 163.00 heading into Tuesday’s London open. Even so, the sluggish yields and a light calendar restrict the cross-currency pair’s latest moves.

That said, the US 10-year Treasury yields remain inactive at around 2.75%, following nearly seven basis points (bps) of the downside on Monday and a 14-bps run-up on Friday.

However, nearly 70% odds suggest the Fed’s 75 bps rate hike in September, per Fed fund futures, join Friday’s strong US jobs report and the hawkish Fedspeak to challenge the gold buyers. On the same line could the US-China tussles over Taiwan and recession woes.

Additionally, UK PM Boris Johnson’s refusal of the new cost of living measures until the successor takes office and the news suggesting Brexit pessimism, shared by Reuters, also weigh on the GBP/JPY prices. “Portugal's border agency SEF has faced criticism for delays in issuing post-Brexit ID cards to thousands of British nationals in the country, putting the spotlight on a structural problem that has affected various other migrant communities for years,” said Reuters.

It should be noted that the political uncertainty isn’t limited to the UK as Japanese Prime Minister Fumio Kishida is also up for shuffling the cabinet. However, Finance Minister Shunichi Suzuki is likely to retain his position, which in turn flashes no major challenges for the Bank of Japan’s (BOJ) easy money policies. The same should keep the GBP/JPY buyers hopeful.

Against this backdrop, S&P 500 Future print mild gains around 4,150 by the press time, following the mixed performance of Wall Street.

Moving on, Japan’s Machine Tool Orders for July, prior 17.1% will be important for immediate moves. Though, major attention should be given to risk catalysts for clear directions.

Technical analysis

A convergence of the 21-day EMA and the 50-day EMA, around 163.40 by the press time, restricts short-term GBP/JPY advances. The pullback, however, remains elusive until staying beyond the 200-day EMA level surrounding 159.45.