GBP/JPY remains depressed below 153.00 ahead of UK CPI

• GBP/JPY extends Tuesday’s pullback from one-week high.
• Covid woes, reflation worries weigh on market sentiment.
• Japan Reuters-Tankan survey came out positive, UK CPI can exert fresh pressure on BOE policymakers to turn hawkish.
• Japan Industrial Production, Brexit also become the key.

GBP/JPY takes offers around 152.70, down 0.10% intraday, amid Wednesday’s Asian session. That said, the cross-currency pair refreshes the day’s low, also extending the previous day’s losses, by the press time.

Downbeat market sentiment, recently due to the coronavirus (COVID-19) woes and reflation fears, seem to weigh on the quote. Also on the negative side could be the cautious sentiment ahead of the key UK data as well as the Brexit drama.

The UK reports the highest death toll since April and The Sun came out with the note, quoting British experts to say, “Britain could be back in lockdown in just 11 weeks as cases spiral just as restrictions are eased.” On the other hand, Brexit jitters continue weighing on the government bills as The Times said, “Government legal bills have surged to a four-year high, with Brexit driving a billing bonanza for City law firms advising Whitehall.” Also portraying the Brexit drama could be the latest comments from the BOE Governor suggesting no room for the UK financial services in the European Union (EU).

Elsewhere, Japan fears supply-chain disruptions due to the covid resurgence in countries as Malaysia and Indonesia, per Kyodo news. The Asian major already gets heavily criticized for holding the Olympics when the nation suffers from the pandemic.

On the positive side, the Reuters-Tankan survey for June 30 to July 09 period suggests, “Japanese manufacturers’ business confidence rose in July to hit a more than two-and-a-half-year high.”

Amid these plays, markets sentiment remains subdued with the US 10-year Treasury yields probing a three-day uptrend and the S&P 500 Futures staying around record top.

Moving on, Japan Industrial Production for May, expected to remain unchanged at 22.0%, may offer immediate direction to GBP/JPY ahead of the UK Consumer Price Index (CPI) for June, forecast 2.2% versus 2.1%. Given the hopes of increased price pressure in the British economy, the BOE may have to reconsider the recently cautious outlook, which in turn could propel the GBP/JPY prices. However, risk catalysts like Brexit and covid become more important to watch for near-term direction.

Technical analysis

GBP/JPY pair’s sustained trading below 153.35-40 resistance confluence, comprising 21-day SMA and a three-week-old falling trend line, keeps sellers hopeful of breaking the 100-day SMA support of 152.40.