- GBP/JPY witnessed some heavy selling after the BoE announced its policy decision.
- The lack of any hawkish tilt disappointed investors and weighed on the British pound.
- The JPY benefitted from a modest USD weakness and contributed to the selling bias.
The British pound weakened across the board after the Bank of England announced its policy decision and dragged the GBP/JPY cross to fresh session lows, around the 154.00 mark in the last hour.
As was widely expected, the BoE maintained the status-quo and decided to leave its monetary policy settings unchanged at the end of the June policy meeting. However, the lack of any hawkish tilt seemed to have disappointing market participants. This, along with concerns about the EU-UK stand-off on the Northern Ireland protocol and a jump in the Delta Plus covid cases in the UK, weighed on the sterling.
On the other hand, the Japanese yen benefitted from a softer tone surrounding the US dollar. This, in turn, was seen as another factor that exerted some downward pressure on the GBP/JPY cross, which, for now, seems to have snapped the three days of the winning streak and stalled this week’s strong bounce from the 151.30 area, or the lowest level since May 7 touched on the first day of the week.
Meanwhile, the underlying bullish sentiment in the financial markets might keep a lid on any strong gains for the safe-haven JPY. Apart from this, the optimistic outlook for the UK economic recovery from the pandemic, bolstered by Wednesday’s flash PMI prints for June, might hold investors from placing aggressive bets and help limit further losses for the GBP/JPY cross, at least for now.
Hence, any subsequent decline below the 154.00 level might still be seen as a buying opportunity and remain limited near the 153.55-50 region. The mentioned support should now act as a key pivotal point, which if broken decisively will shift the bias back in favour of bearish traders. The GBP/JPY cross might then prolong its recent corrective pullback from the 156.00 mark, or multi-year tops.