GBP/JPY: Recovery capped below 155.00 on Brexit, covid unlock concerns

GBP/JPY struggles to extend early Asian recovery beyond 155.00, recently around 154.85, heading into Monday’s London open. In doing so, the cross-currency pair fails to justify upbeat Japanese data as well as price-negative updates for the British pound (GBP).

Japan’s final reading of Industrial Production for April grew past 15.4% initial forecast and prior readings to 15.8%. However, soft Capacity Utilization, 1.1% versus 5.6% prior, seemed to have kept the pair buyers hopeful.

On the other hand, a near 50% jump in the Delta variant of the covid pushes the UK towards extending the final unlock deadline from 21 June by a month. Additionally, the European Union (EU) remains firm on their demand for Britain’s total surrender to the previously agreed deal over Northern Ireland (NI).

However, US President Joe Biden’s refrain from warning UK PM Boris Johnson, as well as French leader Emmanuel Macron’s readiness to ease tension between England and Paris, also favor the GBP/JPY buyers. It’s worth noting that mildly bid S&P 500 Futures and global policymakers, mainly from the Group of Seven (G7) readiness to further donate covid vaccines and keep relief packages flowing might also have contributed to the quote’s recent gains.

Though, a lack of major data and absence of traders from Australia and China, coupled with the pre-Fed trading lull and G7 updates for Beijing, push GBP/JPY traders to search for fresh clues. In doing so, risk catalysts will be the key as a light calendar and the market’s cautious sentiment ahead of Wednesday’s Fed meeting probes momentum traders.

Technical analysis

Although 10-day SMA guards immediate GBP/JPY upside around the 155.00 threshold, bears won’t be serious until the quote stays beyond an ascending trend line from December 21, around 153.95.