The GBP/JPY pair saw increased selling around the mid-215.00 yen mark, slipping to the lower end of its daily range in early European trading on Friday. Nonetheless, prices are staying within the previous day’s range and are hovering around the psychological level of 215.00, showing little change for the day.
On Thursday, traders were surprised by reports suggesting that Japan might cease notifying advance intervention plans. Today, Japan’s Finance Minister Satsuki Katayama reiterated that officials are ready to take appropriate actions in response to currency fluctuations. Additionally, Chief Cabinet Secretary Minoru Kihara mentioned that the government is closely observing market trends and will take necessary measures concerning foreign exchange as needed. This has led to an unwinding of speculative short positions on the Japanese Yen (JPY) and is significantly affecting the GBP/JPY market.
However, JPY bulls seem somewhat hesitant without concrete intervention. Moreover, the significant gap between Japan’s low interest rates and the high returns found in other major economies, such as the UK, serves as a headwind for the yen. On the other hand, the British pound (GBP) is gaining support due to the incoming Prime Minister Andy Burnham’s commitment to strict borrowing rules, easing fiscal anxieties and bolstering investor confidence, especially given the recent dip in global oil prices. Additionally, a trend of selling the US dollar (USD) is providing further support to the pound, which is limiting further declines in the GBP/JPY cross.
Traders are now anticipating a speech from Bank of England Governor Andrew Bailey in France during the US session for insights into the central bank’s policy direction. This will likely have a significant influence on the pound’s price trend and may provide some momentum to the pound/yen cross. Still, the potential for yen intervention seems to limit any aggressive bullish actions.
