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British Pound bounces off YTD low as Yen bulls pause for a breather; bearish bias remains

  • GBP/JPY remains under heavy selling pressure for the second straight day amid a broadly firmer JPY.
  • Japan’s upbeat data reaffirms bets for a more aggressive BoJ policy tightening and boosts the JPY.
  • The bearish fundamental backdrop suggests that the attempted recovery is likely to get sold into.

The GBP/JPY cross continues to lose ground for the second straight day – also marking the fourth day of a fall in the previous five – and drops to the 207.00 neighborhood, or a fresh year-to-date (YTD) low earlier this Tuesday. Spot prices, however, trim a part of heavy intraday losses and trade around mid-208.00s during the first half of the European session, still down 0.25% for the day.

The Japanese Yen (JPY) continues with its relative outperformance as traders unwind short positions amid rising bets of a Bank of Japan (BoJ) interest-rate hike. The expectations were reaffirmed by data released earlier today, which showed that Japan's real wages rose for the seventh consecutive month and the economy expanded at a faster pace than originally estimated. This backs the case for the BoJ to raise borrowing costs on September 17–18.

Meanwhile, some analysts see the risk of a jumbo hike to anchor rising inflation expectations, cap long-end yields and ultimately support the JPY. Moreover, traders are pricing in the possibility of a potential follow-up move in December. The outlook, in turn, continues to boost the JPY. Adding to this, a modest US Dollar (USD) bounce exerts some pressure on the British Pound (GBP), which contributed to the GBP/JPY pair’s steep follow-through decline.

The downside for the GBP, however, seems cushioned in the wake of UK finance minister John Healey's optimistic growth agenda and commitment to fiscal discipline. Furthermore, JPY bulls take a breather following a strong rally witnessed over the past week or so, leading to a modest intraday recovery for the GBP/JPY cross. The fundamental backdrop, however, favors bearish traders, suggesting that any further move up is more likely to be sold into.

Japanese Yen Price Last 7 Days

The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies last 7 days. Japanese Yen was the strongest against the New Zealand Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD0.07%0.19%-3.47%-0.38%-0.58%1.34%0.43%
EUR-0.07%0.13%-3.53%-0.45%-0.65%1.29%0.37%
GBP-0.19%-0.13%-3.67%-0.58%-0.79%1.15%0.26%
JPY3.47%3.53%3.67%3.18%2.98%4.91%4.10%
CAD0.38%0.45%0.58%-3.18%-0.19%1.68%0.82%
AUD0.58%0.65%0.79%-2.98%0.19%1.94%1.05%
NZD-1.34%-1.29%-1.15%-4.91%-1.68%-1.94%-0.90%
CHF-0.43%-0.37%-0.26%-4.10%-0.82%-1.05%0.90%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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