- GBP/JPY extended its sideways consolidative price action through the mid-European session.
- The UK political turmoil weighed on the British pound and kept a lid on any meaningful upside.
- Dovish BoJ outlook continued undermining the JPY and helped limit the downside for the cross.
The GBP/JPY cross lacked any firm directional bias and remained confined in a narrow trading band, above the 151.00 mark through the mid-European session.
A combination of diverging factors failed to assist the cross to capitalize on a three-day-old uptrend and led to a subdued/rangebound price action on Wednesday. The GBP/JPY cross, for now, seems to have stalled its recent bounce from the vicinity of 149.00 mark, or one-month lows touched last Friday.
The British pound's relative underperformance comes amid the controversy over funding arrangement for Prime Minister Boris Johnson's official apartment. The UK political turmoil overshadowed the optimism over the gradual reopening of the UK economy and capped any meaningful gains for the GBP/JPY cross.
On the other hand, the Japanese yen was weighed down by concerns that the recent surge in COVID-19 cases could hinder Japan's fragile economic recovery. The concerns were acknowledged by the Bank of Japan on Tuesday, warning of high uncertainty about the potential economic fallout from the pandemic.
Adding to this, the BoJ revised its forecast for domestic inflation, which is not expected to reach the 2% target through early 2023. This, in turn, further acted as a headwind for the JPY, which extended some support to the GBP/JPY cross and helped limit the downside, at least for the time being.
That said, worries that soaring coronavirus cases in some other countries could derail the global economic recovery from the pandemic weighed on investors' sentiment. This was seen as another factor that further held traders from placing any aggressive directional bets around the GBP/JPY cross.
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 stays below 1.0700 after US data
EUR/USD stays in a consolidation phase below 1.0700 in the early American session on Wednesday. The data from the US showed a strong increase in Durable Goods Orders, supporting the USD and making it difficult for the pair to gain traction.
USD/JPY refreshes 34-year high, attacks 155.00 as intervention risks loom
USD/JPY is renewing a multi-decade high, closing in on 155.00. Traders turn cautious on heightened risks of Japan's FX intervention. Broad US Dollar rebound aids the upside in the major. US Durable Goods data are next on tap.
Gold trades on the back foot, manages to hold above $2,300
Gold struggles to stage a rebound midweek following Monday's sharp decline but manages to hold above $2,300. The benchmark 10-year US Treasury bond yield stays in the green above 4.6% after US data, not allowing the pair to reverse its direction.
Worldcoin looks set for comeback despite Nvidia’s 22% crash Premium
Worldcoin price is in a better position than last week's and shows signs of a potential comeback. This development occurs amid the sharp decline in the valuation of the popular GPU manufacturer Nvidia.
Three fundamentals for the week: US GDP, BoJ and the Fed's favorite inflation gauge stand out Premium
While it is hard to predict when geopolitical news erupts, the level of tension is lower – allowing for key data to have its say. This week's US figures are set to shape the Federal Reserve's decision next week – and the Bank of Japan may struggle to halt the Yen's deterioration.