GBP/JPY steadies around 160.00 mark after two-way intraday volatile swings
|- A combination of factors led to good two-way price moved for GBP/JPY on Thursday.
- Recession fears undermined the safe-haven JPY and acted as a headwind for the cross.
- Weaker USD benefitted sterling and helped the cross to reverse a sharp intraday slide.
The GBP/JPY cross witnessed an intraday turnaround on Thursday and dropped over 180 pips from the daily swing high, around the 160.80-160.85 region. The sharp intraday fall, however, stalled and was quickly bought into near the 159.00 round figure. The cross now seems to have stabilized and was seen trading around the 160.00 mark, nearly unchanged for the day.
Investors remain worried that a more aggressive move by major central banks to constrain inflation and the Russia-Ukraine war could pose challenges to the global economy. This, in turn, continued driving haven flows towards the Japanese yen and prompted selling around the GBP/JPY cross. That said, a combination of factors extended support and helped limit deeper losses.
A goodish recovery in the global risk sentiment - as depicted by a generally positive tone around the equity markets - kept a lid on any meaningful gains for safe-haven currencies, including the JPY. On the other hand, the emergence of fresh US dollar selling - amid speculations that the Fed could pause the rate hike cycle later this year - benefitted the sterling.
The solid intraday bounce, however, lacked any follow-through or bullish conviction amid diminishing odds for any further interest rate hikes by the Bank of England. Apart from this, the UK-EU impasse over the Northern Ireland protocol of the Brexit agreement further held back traders from placing aggressive bullish bets around the GBP/JPY cross, at least for now.
The mixed fundamental backdrop, along with the recent range-bound price action witnessed over the past one-and-a-half week or so, warrants some caution before positioning for a firm near-term direction. In the absence of any major market-moving economic releases, the broader market risk sentiment will continue to play a key role in influencing the GBP/JPY cross.
Technical levels to watch
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