- A combination of factors assisted GBP/JPY to gain some follow-through traction on Thursday.
- The GBP drew support from easing fears about a breakdown of the post-Brexit EU-UK relations
- A positive risk tone undermined the safe-haven JPY and remained supportive of the modest uptick.
The GBP/JPY cross maintained its bid tone through the early European session, albeit lacked follow-through and so far, has struggled to capitalize on the move beyond the 154.00 mark.
The cross built on the previous day's bounce from 153.35 area and gained some positive traction on Thursday amid a goodish pickup in demand for the British pound. Reports indicated that Britain would hold off suspending parts of the Brexit divorce deal relating to Northern Ireland for as long as talks with the EU remain constructive. This helped ease fears about a further breakdown of the post-Brexit UK-EU relations.
Meanwhile, the prospects for an imminent rate hike by the Bank of England turned out to be another factor that provided a modest lift to the sterling. Adding to this, a generally positive tone around the equity markets undermined the Japanese yen's relative safe-haven status and remained supportive. That said, the worsening row over the post-Brexit fishing rights between France and Britain capped gains for the GBP/JPY cross.
In the latest development, French fishermen were reportedly planning to block British vessels' access to French ports in protest against Britain's refusal to grant them more licences to operate in UK territorial waters. This warrants some caution for bullish traders and positioning for any further appreciating move for the GBP/JPY cross amid absent relevant market-moving economic releases from the UK on Thursday.
Traders now look forward to the BoE Governor Andrew Bailey's scheduled speech for some impetus later this Thursday. Apart from this, fresh Brexit-related developments will influence the sentiment surrounding the sterling. Traders will further take cues from the broader market risk sentiment, which will drive demand for the safe-haven JPY and produce some meaningful trading opportunities around the GBP/JPY cross.
Technical levels to watch
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