GBP/JPY bears attack 163.00 as UK’s political, economic woes join risk-off mood

GBP/JPY renews intraday low around 163.00 as risk-aversion intensifies during Monday’s Asian session. The bearish bias also takes clues from the downbeat signals surrounding the UK’s political and economic plays.

Having failed to remove UK Prime Minister (PM) Boris Johnson in their first attempt, the Conservative Party members eye another effort to oust the British leader, as signaled by the UK Telegraph. The news mentioned, “Opponents of the Prime Minister will try to overhaul 1922 Committee rules so that another leadership challenge can be triggered immediately.”

Elsewhere, the latest survey from the British Chambers of Commerce (BCC) mentioned that 54% of more than 5,700 companies it surveyed between May 16 and June 9 expected turnover to increase over the next 12 months. This is down from 63% in the previous survey and the lowest share since late 2020, when many businesses were under some form of COVID restrictions, per Reuters. The news also stated, “British companies have turned increasingly glum about the outlook, with inflation surging and investment plans looking stagnant.”

In Japan, news from Nikkei suggests that the elections are likely to favor the ruling party in Japan. The same hints at fewer challenges for the Bank of Japan’s (BOJ) easy money policies, which in turn could have probed the GBP/JPY bears but did not.

It’s worth noting that the market’s risk-off mood recently cheered the downbeat US PMIs as the ISM Manufacturing PMI for June slumped to the lowest levels in two years, to 53.0 versus 54.9 expected and 56.1 prior. Following the data, ANZ Bank said, “Surveyed data from both PMIs and the US ISM are all pointing to faltering orders growth, lower backlogs of work indices and softer production over the summer. It is hard to escape the growing growth pessimism, which is also fanning expectations of a peak in both inflation and central bank hawkishness. 

Moving on, the US holiday and a light calendar may restrict GBP/JPY moves but sour sentiment can keep the sellers hopeful.

Technical analysis

Unless bouncing back beyond the 21-DMA hurdle surrounding 165.35, GBP/JPY bears keep eyes on the seven-week-old support line, near 162.00 by the press time.