- GBP/JPY gained some positive traction on Thursday and snapped five days of the losing streak.
- A combination of factors lifted the global risk sentiment and undermined the safe-haven JPY.
- The GBP benefitted from a modest USD pullback and provided an additional boost to the cross.
The GBP/JPY cross edged higher during the Asian session and climbed to fresh daily tops, around the 149.25-30 region in the last hour.
The cross managed to find some support near mid-148.00s, just ahead of monthly lows – and regained positive traction on Thursday. This marked the first day of a positive move in the previous six and was sponsored by a combination of factors. A positive start of trading in the US equity futures undermined demand for the safe-haven Japanese yen, which, in turn, was seen as a key factor that extended some support to the GBP/JPY cross.
The global risk sentiment got a minor lift after updated US trial results showed that the coronavirus vaccine developed by Oxford University and AstraZeneca was 76% effective at preventing symptomatic illness. Apart from this, expectations for additional stimulus from the US government further boosted investors’ confidence.
The risk-on flow also weighed on the US dollar, which extended some support to the British pound. This was seen as another factor that contributed to the bid tone surrounding the GBP/JPY cross. That said, concerns about the third wave of COVID-19 infections and pandemic-related lockdowns in Europe could keep a lid on any optimistic move.
Hence, it will be prudent to wait for some strong follow-through buying before confirming that the recent sharp corrective pullback from nearly three-year tops has run its course. Nevertheless, the GBP/JPY cross has now recovered the previous day’s modest losses and remains at the mercy of the broader market risk sentiment.
In the absence of any major market-moving economic releases, either from Japan or the UK, market participants will look forward to comments by central bank governors for some impetus. Both the Bank of England Governor Andrew Bailey and the Bank of Japan Governor Haruhiko Kuroda are due to speak later this Thursday.