GBP/JPY snaps three-day winning streak, below 133, amid fresh risk-off sentiment
- GBP/JPY drops heavily after BOE’s Chief Economist warns of long-term damages.
- BOJ’s Kuroda also spreads downbeat comments during his Parliament appearance.
- Expectations of a spike in virus cases, the US-China trade war add to the risk aversion.
GBP/JPY declines to 132.25, down 0.42% on a day, amid the initial hours of Tokyo open on Tuesday. While the early-Asian trade war fears stalled the pair’s three-day run-up, downbeat comments from the BOJ and the BOE policymakers seem to have recently weighed on the quote.
The BOE’s Chief Economist Andy Halandes warned that the pandemic will leave permanent scars on Britain’s economy as households and businesses cut back spending, per the UK Times. That said, the BOE managed to placate traders during its latest monetary policy meeting while leaving doors open for further action, if needed.
On the other hand, the BOJ Governor Haruhiko Kuroda also crossed wires, via Reuters, while speaking at the Parliament. The central bank Governor cited fears of global economic constraints due to the coronavirus (COVID-19) outbreak while also saying that Japan's economy likely to remain in a severe state, inflation to weaken.
It should also be noted that NBC news came out with the unconfirmed data from the White House that suggests a spike in the virus cases in the US.
Earlier during the day, US President Donald Trump denied reopening of the Phase 1 deal terms with China, which in turn shows the Republican leaders’ dislike for the dragon nation and keeps the risk-tone sentiment heavy.
Furthermore, an absence of upbeat news from the Brexit talks also weighs on the pair.
While portraying the trading sentiment, US 10-year treasury yields drop three basis points (bps) to 0.697% whereas Japan’s NIKKEI drops 0.24% to 20,340 by the press time.
Given the present risk-off sentiment, trade/virus updates can have a higher market impact and will be preferred over the light calendar. Though, preliminary readings of Japan’s Leading Economic Index and Coincident Index may offer intermediate moves.
Technical analysis
The pair’s pullback from 50-day SMA, currently near 133.10, seems the drag the quote below 132.00 area, for now, whereas Thursday’s low near 130.65 may question the bears afterward.