GBP/JPY finds cushion near 194.00, more downside remains likely

GBP/JPY discovers a temporary cushion near 194.00, while its outlook remains uncertain.
UK 30-year gilt yields soared amid growing concerns over mounting debt and caution over Trump’s protectionist policies.
The BoJ said that it is considering raising the inflation forecast due to the depreciating Yen.

Sagar Dua FXStreet

The GBP/JPY pair finds temporary support near 194.00 in Friday’s North American session after a two-day sell-off amid weakness in the Pound Sterling (GBP) across the board. The British currency faces intense selling pressure as yields on United Kingdom (UK) 30-year gilts spiked above 5.4%, the highest since 1992.

Market participants dumped UK gilts as they are worried about the UK economic outlook. Concerns over UK growth prospects have mounted, partly due to my deepening uncertainty over likely tight United States (US) trade policies under the administration of President-elect Donald Trump and the piling nation’s debt.

Higher UK gilt yields have resulted in a sharp increase in the government’s borrowing costs, which could prompt the need for more tax collection and lower public spending by the finance ministry, given that the Chancellor of the Exchequer vowed to avoid tapping borrowings to incur day-to-day spending.

However, UK Treasury Minister Darren Jones clarified at the House of Commons on Thursday that the government's decision to only borrow for investment was "non-negotiable". Jones added that it is normal for the price of gilts to "vary" and assured that financial markets continue to function in an "orderly way".

Meanwhile, the Japanese Yen (JPY) preforms strongly on Friday as the Bank of Japan (BoJ) is still considering the interest rate decision for its January monetary policy review, Bloomberg reported. The agency further added that the BoJ mulls to upgrade core-core inflation views for FY2024 and FY2025 on depreciating Yen.

Author

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

Editor's Picks

EUR/USD drops to daily lows near 1.1630

EUR/USD now loses some traction and slips back to the area of daily lows around 1.1630 on the back of a mild bounce in the US Dollar. Fresh US data, including the September PCE inflation numbers and the latest read on December consumer sentiment, didn’t really move the needle, so the pair is still on course to finish the week with a respectable gain.

GBP/USD trims gains, recedes toward 1.3320

GBP/USD is struggling to keep its daily advance, coming under fresh pressure and retreating to the 1.3320 zone following a mild bullish attempt in the Greenback. Even though US consumer sentiment surprised to the upside, the US Dollar isn’t getting much love, as traders are far more interested in what the Fed will say next week.

Gold makes a U-turn, back to $4,200

Gold is now losing the grip and receding to the key $4,200 region per troy ounce following some signs of life in the Greenback and a marked bounce in US Treasury yields across the board. The positive outlook for the precious metal, however, remains underpinned by steady bets for extra easing by the Fed.