GBP/JPY: worst day in 2 months leaves July lows exposed

GBP/JPY lost on Thursday more than 150 pips, making a strong reversal after posting yesterday the highest close in two weeks. 

BoE: A game changer for GBP

The pound started the day on a strong note following the release of the UK services PMI, that rose above expectations to 53.8. Then it was the turn of the Bank of England. As expected, the central bank kept rates unchanged at 0.25%, with a 6-2 vote at the Monetary Policy Committee. Markets considered that the statement and the Inflation Report were somehow dovish, with the downward revision to growth and wage forecasts. Sterling tumbled in the market. 

Carney’s press conference failed to offer support to the pound that continued to slide. BoE Governor said that it would have to raise rates more than the market is currently discounting if the economy evolves as forecast. Market expectations about the next rate hike from the BoE were moved from August to November of next year. 

BoE: More dovish but still too optimistic on growth - Danske Bank

The yen was among the top performers among majors boosted by the slide of USD/JPY, that dropped to test 110.00 following weak US economic data. The combination of a somewhat stronger yen and the BoE monetary policy decision, pushed GBP/JPY to have the worst day in two months. 

GBP/JPY Levels 

GBP/JPY bottomed at 144.43. During the American session moved modestly off lows. After reaching resistance at 144.80 turned again to the downside and near the end of the session, is trading at 144.50/55. 

The pair is back below the 20-day moving average (145.90) and is looking at July lows, around the 144.00 handle. A break lower could clear the way to a decline to 143.30 before the key 142.50 zone.  Momentum shifted dramatically to the downside. The pair needs to rise back above the 145.80 to recover the bullish bias.