- GBP/JPY oscillates in a narrow range and is influenced by a combination of diverging forces.
- Fears of a full-blown global banking crisis benefit the safe-haven JPY and act as a headwind.
- The BoJ's dovish outlook should continue to lend support and limit any meaningful downfall.
The GBP/JPY cross struggles to capitalize on the previous day's strong recovery move of over 350 pips from a fresh one-month low and oscillates in a narrow trading band through the early part of the European session on Friday. The cross remains below the 162.00 mark and the recent price action warrants some caution for aggressive traders or before positioning for a firm near-term direction.
The market sentiment remains fragile amid persistent worries about a full-blown global banking crisis, which continues to drive some haven flows towards the Japanese Yen (JPY) and acts as a headwind for the GBP/JPY cross. Adding to this, expectations that the Bank of England (BoE) will pause its rate-hiking cycle sooner rather than later also contribute to capping the upside for the cross. In fact, interest rate futures suggest a 50% chance that the BoE will leave interest rates unchanged next week and an equal possibility of a smaller 25 bps lift-off.
That said, the emergence of heavy selling around the US Dollar benefits the British Pound and lends support to the GBP/JPY cross. Moreover, multi-billion-dollar lifelines for troubled banks in the US and Europe might have eased concerns about widespread contagion, which should keep a lid on any meaningful gains for the JPY and help limit any meaningful slide for the cross. It is worth mentioning that large US banks came to the rescue of troubled First Republic Bank and injected $30 billion into the California, San Francisco-based lender on Thursday.
The development followed Credit Suisse's announcement that it will exercise an option to borrow up to $54 billion from the Swiss National Bank (SNB) to shore up liquidity. Apart from this, growing acceptance that the Bank of Japan (BoJ) will stick to its dovish stance to support the domestic economy supports prospects for some meaningful appreciating move for the GBP/JPY cross. In fact, the outgoing BoJ Governor Haruhiko Kuroda said earlier this Friday that there is room to cut interest rates further into negative territory from the current -0.1%.
In the absence of any relevant market-moving economic releases on Friday, the aforementioned fundamental backdrop suggests that the path of least resistance for the GBP/JPY cross is to the upside. That said, this week's repeated failures near the 164.00 mark and the lack of any meaningful buying warrants caution before positioning for any meaningful appreciating move in the near term.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD sticks to lows near 1.0550 as US Dollar holds firmer
EUR/USD stays in a bearish consolidation phase and oscillates in a narrow range near six-month lows at around 1.0550 on Wednesday. The US Dollar clings to the recent gains ahead of August Durable Goods Orders data, not allowing the pair to stage a rebound.
GBP/USD trades at fresh multi-month lows near 1.2150
GBP/USD remains under bearish pressure and trades near the multi-month low it set slightly below 1.2150 mid-week. The persistent US Dollar (USD) strength despite a modest improvement seen in risk mood limits the pair's rebound ahead of US data releases.
Gold struggles to gain traction, stays below $1,900
Gold price finds it difficult to stage a rebound after dropping to a monthly low below $1,900 on Wednesday. The benchmark 10-year US Treasury bond yield holds steady near the multi-year high it set above 4.5%, making it difficult for XAU/USD to shake off the bearish pressure.
This short-term Bitcoin holder indicator forecasts another rally for BTC
Bitcoin price has been malleable to the short-term holder movements. A large spike in profits for short-term holders is almost always met by a correction in BTC.
US government shutdowns and US Dollar implications
A potential US government shutdown that could start October 1st looms, the chances of which are more or less seen as a coin flip at this point. Should a shutdown transpire, there could be a negative impact of the US Dollar.