GBP/JPY dives to one-week lows, around mid-138.00s amid a flurry of Brexit headlines

The emergence of some fresh selling around the British pound dragged the GBP/JPY cross to one-week lows, around mid-138.00s during the early European session.

The cross extended Friday's retracement slide from the 140.70 region, or three-month tops and witnessed some follow-through selling on the first day of a new trading week. The not so optimistic headlines dampened prospects for an imminent Brexit deal and took its toll on the sterling, which, in turn, exerted some pressure on the GBP/JPY cross.

A senior EU diplomat reportedly said that the EU's chief Brexit negotiator Michel Barnier was downbeat about the prospects of sealing a new trade deal with Britain. At a briefing to the bloc’s national ambassadors, Barnier said that that there is no Brexit deal yet and added that differences on the three key outstanding issues remain open.

Separately, The Sun reported that the UK Prime Minister Boris Johnson is ready to pull out of the talks if the EU refuses to budge from their eleventh-hour Brexit demands. With less than four weeks left before the end of the Brexit transition period on December 31, receding hopes for a last-minute Brexit deal weighed heavily on the sterling.

On the other hand, a softer tone surrounding the equity markets drove some haven flows towards the Japanese yen and further contributed to the GBP/JPY pair's ongoing corrective slide. The global risk sentiment took a hit on Monday after Reuters reported that the United States was preparing sanctions on at least a dozen Chinese officials over their alleged role in the disqualification of elected opposition legislators in Hong Kong.

In the absence of any major market-moving economic releases from the UK, developments surrounding the Brexit saga will continue to act as an exclusive driver of the GBP price dynamics. This, along with the broader market risk sentiment will influence the safe-haven JPY and further contribute to produce some short-term trading opportunities around the GBP/JPY cross.

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