- GBP/JPY rallies as central banks tackle liquidity crisis with coordinated efforts.
- Swap lines reintroduced: Major central banks unite to address global liquidity concerns.
- Eyes on Bank of England, 25 bps one and done?
GBP/JPY marched higher in early Asian hours on Monday as the Japanese Yen demand faded on the back of growing optimism on the liquidity front. The risk sentiment got a boost on Monday due to a globalized effort to tame last week's liquidity crisis.
To reestablish confidence in the financial system, some major central banks, including the Bank of Japan (BoJ) and Bank of England (BoE), have made a coordinated effort to dilute the banking ecosystem across the globe with US Dollars. The swap line has been introduced for this purpose.
The main resource for this swap line is the Federal Reserve (Fed), which the Fed will lend US Dollars to other central banks in exchange for local currency as a short-term loan. The swap line will begin from Monday until April.
On Sunday, the Bank of England said it welcomed the actions by the Swiss authorities to merge Credit Suisse with UBS Group and also emphasized that the UK banking system is well-capitalized and funded. The BoE rate decision is on Thursday, and it will be important to see their forward guidance. This may be the last rate hike from the BoE amid the ongoing liquidity crisis.
The Bank of Japan's March meeting Summary of Opinions released earlier highlights nothing new, as the bank has remained on an ultra-easing monetary stance for decades. Adding to this, Japanese Finance Minister Shunichi Suzuki said on Monday he was closely watching market moves after a weekend rescue deal for Credit Suisse Group
It is also important to watch how this week unfolds on the liquidity front, citing some earlier reports stating that two European banks are under scrutiny. Therefore, the upside gains in GBP/JPY are likely to remain vulnerable.
Levels to watch
Recommended content
Editors’ Picks
EUR/USD extends gains above 1.0700, focus on key US data
EUR/USD meets fresh demand and rises toward 1.0750 in the European session on Thursday. Renewed US Dollar weakness offsets the risk-off market environment, supporting the pair ahead of the key US GDP and PCE inflation data.
GBP/USD extends recovery above 1.2500, awaits US GDP data
GBP/USD is catching a fresh bid wave, rising above 1.2500 in European trading on Thursday. The US Dollar resumes its corrective downside, as traders resort to repositioning ahead of the high-impact US advance GDP data for the first quarter.
Gold price edges higher amid weaker USD and softer risk tone, focus remains on US GDP
Gold price (XAU/USD) attracts some dip-buying in the vicinity of the $2,300 mark on Thursday and for now, seems to have snapped a three-day losing streak, though the upside potential seems limited.
Injective price weakness persists despite over 5.9 million INJ tokens burned
Injective price is trading with a bearish bias, stuck in the lower section of the market range. The bearish outlook abounds despite the network's deflationary efforts to pump the price.
US Q1 GDP Preview: Economic growth set to remain firm in, albeit easing from Q4
The United States Gross Domestic Product (GDP) is seen expanding at an annualized rate of 2.5% in Q1. The current resilience of the US economy bolsters the case for a soft landing.