GBP/JPY Exchange Rate Remains Sidelined Ahead of Multiple Data and Events
The GBP/JPY exchange rate has remained largely unchanged, hovering near 161.70 as it pares the recent gains ahead of the key day comprising multiple data/events. This has put a halt to its brief two-day uptrend. The market is awash with concerns regarding the negative reception of UK Prime Minister Rishi Sunak’s Brexit deal among some of the fellow Conservatives and the European Research Group (ERG). This alongside the looming fears of the Bank of England’s (BoE) likely dovish hike, given that the banking crisis is currently challenging the “Old Lady” aka the UK central bank.
It is important to note that despite the market’s concerns, a recovery in the US Treasury bond yields and Tuesday’s holiday in Japanese markets allowed the quote to remain slightly firmer lately. On this note, it is worth mentioning that the US 10-year and two-year Treasury bond yields stretched late Monday’s bounce off the lowest levels since September 2022 to 3.60% and 4.18%, respectively.
In tracing the latest rebound in the bond coupons, the comments from the US policymakers, as well as actions, to tame the fears emanating from the latest banking fallouts, have gained major attention. Among them, US Treasury Secretary Janet Yellen’s comments strike a chord as she said, “Treasury, Fed, FDIC actions reduced the risk of further bank failures that would have imposed losses on the deposit insurance fund.”
Earlier on Tuesday, Bloomberg shared the news that the “US officials are studying ways they might temporarily expand Federal Deposit Insurance Corporation (FDIC) coverage to all deposits, a move sought by a coalition of banks arguing that it’s needed to head off a potential financial crisis.” The talks of the US authorities discussing ways to surpass Congress to defend the banks has also underpinned yields and the GBP/JPY rebound.
However, the cautious mood ahead of today’s UK’s Consumer Price Index (CPI) data for February, expected at 9.8% YoY versus 10.1% prior, prod the bulls. On a similar line is the anxiety surrounding Brexit voting in the UK’s House of Commons amid recent rejections from the European Research Group (ERG) and the Democratic Unionist party (DUP).
Forex traders are currently awaiting the release of Japan’s return from the holiday, the UK House of Commons vote on Brexit bill, and British CPI for February . These economic indicators are expected to play a critical role in determining the near and long-term fortunes of GBP/JPY.
Technical analysis reveals that the GBP/JPY exchange rate continues to trade higher between a one-month-old descending resistance line and an ascending support line from mid-January, respectively near 163.30 and 160.75 in that order.
