GBP/JPY prints three-day uptrend around 150.50 on firmer Treasury yields

• GBP/JPY edges higher, run-up capped below 150.70 of late.
• UK reports highest weekly virus-led death toll since March, Japan up for taking eight more prefectures under covid emergency.
• Brexit jitters renew as EU prepares to block UK from international convention.
• Japan Leading Economic Index for June, risk catalysts are the key.

GBP/JPY stays firmer around 150.60, up 0.08% intraday, while rising for the third consecutive day during Wednesday’s Asian session. Although market sentiment dwindles of late, firmer GBP and strong US Treasury yields seem to recently weigh on the yen.

The British Pound (GBP) benefits from a faster vaccination and the government push to order more for the planned booster shots. In doing so, the British currency ignores the highest weekly total of the covid-led death numbers and around 30,000 new cases.

Also challenging the Sterling were the Brexit headlines from the UK Express stating that the European Union (EU) wants to stop the UK from joining the 2007 Lugano Convention.  On a Brexit positive side, the news mentions, “In order to ease the pressure on British businesses, the Government has extended the deadline to use the UKCA certification until 2023.”

The virus conditions in Japan also turn grim and require the government to get more prefectures under the virus-led emergency status. “Hokkaido, Miyagi, Gifu, Aichi, Mie, Shiga, Okayama and Hiroshima will come under the measure from Friday until Sept. 12, joining 13 other prefectures including Tokyo and Osaka, according to government and ruling party sources,” said Kyodo News.

It should be noted that the receding odds of the Fed’s tapering and US stimulus are some of the extra catalysts that have recently favored GBP/JPY prices, by way of risk-on mood. Also, Bloomberg’s news signaling higher inflation adds to the GBP strength. “Britain’s construction, manufacturing and food preparation industries are pushing wages higher across the economy due to a shortage of workers to fill available jobs,” states the piece.

Amid these plays, Japan’s Nikkei 225 rises 0.30% whereas the US stock futures struggle for a clear direction after an upbeat Wall Street close. Further, the US 10-year Treasury yields refresh one week top near 1.30% by the press time after rising the most in two weeks the previous day.

Moving on, Japan’s Leading Economic Index for June, expected to remain unchanged at 104.10 may offer immediate direction to GBP/JPY but major attention should be given to the coronavirus and Brexit headlines for a clearer view.

Technical analysis

Unless crossing 10-DMA and early August lows, respectively around 150.85 and 151.20, GBP/JPY bulls remain skeptical.