- GBP/JPY witnessed heavy selling on Thursday amid the prevalent risk-off mood.
- COVID-19 jitters weighed on investors’ sentiment and boosted the safe-haven JPY.
- A softer tone surrounding the GBP further contributed to the intraday selling bias.
A strong pickup in demand for the safe-haven JPY dragged the GBP/JPY cross to over two-month lows, around the 151.15 region during the first half of the European session.
Worries about the economic fallout from the spread of the highly contagious Delta variant of COVID-19 took its toll on the global risk sentiment. This was evident from a steep decline in the equity markets, which boosted demand for traditional safe-haven currencies, including the Japanese yen and exerted heavy pressure on the GBP/JPY cross.
Apart from this, a softer tone surrounding the British pound further contributed to the GBP/JPY pair's sharp intraday decline to the lowest level since May 4. That said, the optimism over the imminent reopening of the UK economy acted as a tailwind for the sterling and helped limit any deeper losses for the cross, at least for the time being.
It is worth recalling that the UK Prime Minister Boris Johnson set out plans for the final step of easing lockdown and announced that all restrictive measures would be lifted on July 19. Johnson also confirmed that people will no longer be instructed to work from home and that there will be no limits on how many people, or where they can meet socially.
In the absence of any major market-moving economic releases from the UK, the JPY price dynamics would continue to be an exclusive driver of the pair's momentum. From a technical perspective, sustained weakness below the 151.00 mark will be seen as a fresh trigger for bearish traders and turn the GBP/JPY cross vulnerable to extend its downward trajectory.
Technical levels to watch
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