GBP/JPY: Mildly bid around 136.00 amid UK politics, risk-on sentiment

12 Jul 2019

  • Expectations surrounding easy monetary policy dominated over the US-China trade risk catalysts.
  • Equities, bond yields manage to lure buyers while safe-havens weakened.
  • Japan’s industrial production and the UK political plays will be followed for fresh impulse.

Although improving risk sentiment pulled the GBP/JPY pair off from 1-week low, political uncertainty at the UK exert downside pressure on the quote that trades below 136.00 amid Friday morning in Asia.

Be it the Bank of England (BOE) Governor or the US Federal Reserve policymakers, signals of easy monetary policy were well received by the global investors. Flight to equities remains intact and the US 10-year treasury yield, the global risk barometer, surges to 1-month high as it takes the rounds 2.132%.

Anti-Semitism accusations on some of the top members of the opposition Labour party, coupled with criticism on Boris Johnson’s failure to support the now ex-UK ambassador to the US, grabbed market attention. Adding to the pessimism was the European Commission Chief nominee who closed the door for renegotiating the Brexit deal.

It should also be noted that the US President Donald Trump’s tweets raising additional blocks to expectation of the trade deal with China couldn’t derail the investor sentiment.

While May month Industrial Production details from Japan acts as an immediate catalyst to watch, global risk events and UK political plays can keep playing background music for the traders. Speech from the BOE’s Gertjan Vlieghe will also have its impact on prices.

The Industrial Production reading may is expected to remain unchanged at -1.8% (YoY) and +2.3% (MoM) but the Capacity Utilization may slump to +0.2% from +1.6% earlier.

Technical Analysis

Late-September 2016 high around 132.50 and the year 2019 low at 131.79 can keep flashing on bears’ radar unless prices rally beyond monthly top near 137.80, which in turn can please buyers with 138.33 and 140.00 round-figure.

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