British Pound flat lines near 215.00 as looming intervention risks support JPY
The GBP/JPY cross attracts fresh sellers in the vicinity of mid-215.00s and slides to the lower end of its daily range during the early European session on Friday. Spot prices, however, remain confined within the previous day's range and currently trade around the 215.00 psychological mark, nearly unchanged for the day.
Reports that Japan may stop signaling intervention plans in advance caught traders off guard on Thursday. Moreover, Japan’s Finance Minister Satsuki Katayama reiterated earlier today that officials are ready to act appropriately on currency fluctuations. Adding to this, Japan's chief cabinet secretary, Minoru Kihara, said that the government is closely monitoring market movements with a high sense of urgency and will take appropriate action on FX at all times as needed. This, in turn, prompts some follow-through unwinding of speculative short positions around the Japanese Yen (JPY) and turns out to be a key factor weighing on the GBP/JPY cross.
The JPY bulls, however, seem hesitant in the absence of actual intervention. Moreover, the persistently wide gap between Japan’s low interest rates and the higher yields available in other major economies, including the UK, acts as a headwind for the JPY. The British Pound (GBP), on the other hand, draws support from the incoming UK Prime Minister Andy Burnham’s commitment to adhere to strict borrowing rules. This, in turn, helps ease fiscal concerns amid the recent slump in global oil prices, bolstering investors' confidence. Furthermore, the prevalent US Dollar (USD) selling supports the GBP and limits further downside for the GBP/JPY cross.
Traders now look forward to the Bank of England Governor Andrew Bailey's scheduled speech in France later during the US session for more cues about the central bank's policy path. This, in turn, will play a key role in influencing the GBP price dynamics and provide some impetus to the GBP/JPY cross. The upside, however, seems limited as looming JPY intervention risks might hold back bulls from placing aggressive bets.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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