- GBP / JPY fluctuated between lukewarm gains / minor losses at the start of the European session.
- A softer risk tone extended some support for the safe haven JPY and capped the upside.
- BoE Governor Andrew Bailey’s speech on Friday could provide further directional impetus.
The GBP / JPY cross quickly retreated around 25 pips from daily highs and was last seen trading in neutral territory, around the key psychological bar of 140.00.
The cross has swung in a narrow band over the past two trading sessions and consolidated this week’s strong positive movement of around 200 pips to new year highs. The fork-related trade action could be attributed to some caution ahead of the much-anticipated Jackson Hole Symposium.
The British pound did not appear to be affected by renewed concerns over the lack of progress in Brexit negotiations. However, a softer risk tone extended some support for the safe haven status of the Japanese Yen and kept a lid on any uncontrollable rally for the GBP / JPY cross in the absence of relevant economic releases.
The latest escalation between the world’s two largest economies, over actions in the disputed South China Sea, weighed on global risk sentiment. It should be remembered that the United States has imposed visa restrictions on some Chinese people. 24 companies were also added to the entity list for helping to build military islands in the region.
The market is now focused on remarks by BoE Governor Andrew Bailey on Friday, who will play a key role in influencing short-term GBP price dynamics. This, along with the market sentiment of risk will help traders determine the next step in a directional move for the GBP / JPY crossover.
In the meantime, the speech by Fed Chairman Jerome Powell later this Thursday could instill some volatility in global financial markets and generate short-term trading opportunities.