- 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 drops below 1.0800 after German Retail Sales data
EUR/USD has come under fresh selling pressure and trades below 1.0800 after the data from Germany showed that Retail Sales declined by 1.9% MoM in February. Resurgent US Dollar demand is adding to the downside in the pair. US data are next in focus.
GBP/USD stays weak near 1.2600 amid market caution
GBP/USD remains defensive near 1.2600 in European trading on Thursday. The hawkish tone from Fed Governor Christopher Waller keeps the US Dollar afloat amid a cautious trading environment ahead of key US data releases and the Good Friday trading lull.
Gold price bulls keenly await US PCE Price Index on Friday before placing fresh bets
Gold price (XAU/USD) continues with its struggle to make it through the $2,200 mark on Thursday and oscillates in a narrow trading band through the early part of the European session.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
The other terminal rate: How far will policy rates be cut?
Recent communication by the Federal Reserve and the ECB has made it clear that the first cut in official interest rates is coming. Both central banks are saying the same but the ECB communication is more opaque than that of the Fed.