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FOREX: GBPJPY Approaches December Lows Following BOE Decision

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  • Two things have weighed on GBP on Thursday, which is among the poorest performers in G10. A particularly soft UK Construction PMI set the initial tone (48.1 vs. Exp. 53.5), underpinning the sensitivity around growth and the near-term trajectory of the UK economy. Secondly, two dissenting votes for a bolder 50bp rate cut from the BoE’s MPC provided a moderately dovish surprise and spurred an extension of sterling weakness.
  • This saw GBPUSD fall sharply back below the 1.24 handle, but given the recent focus on developing Yen strength, GBPJPY weakness was in the spotlight, having depreciated back below 190.00 and piercing the January lows at 189.34.
  • Bearish momentum has been building for this cross since the start of the year, where fiscal worries prompted a clean break of trendline support around 195.00, a level we have not been back above since. The cross narrowed the gap to within 16 pips of the December low (188.09), before recovering amid some underlying hawkish details within the BOE minutes.
  • Elsewhere, EURUSD’s firm rejection of the 50-day EMA on Wednesday keeps bearish momentum for EURJPY at the forefront of G10 FX sentiment, with the cross printing fresh recent lows of 157.24 on Thursday.
  • A more hawkish BOJ narrative and ongoing growth concerns in the Eurozone have provided headwinds, and losses now tally around 3.2% on the year. 156.18, is a key support, the Dec 3 low. The USDJPY trend needle points firmly south, with spot currently residing below 152.00, down half a percent on the session.
  • All focus turns to January’s US employment report, which will receive almost as much attention for comprehensive revisions as for the monthly nonfarm payroll gains, which are expected to slow to 170-180k from December’s strong 256k. 
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  • Two things have weighed on GBP on Thursday, which is among the poorest performers in G10. A particularly soft UK Construction PMI set the initial tone (48.1 vs. Exp. 53.5), underpinning the sensitivity around growth and the near-term trajectory of the UK economy. Secondly, two dissenting votes for a bolder 50bp rate cut from the BoE’s MPC provided a moderately dovish surprise and spurred an extension of sterling weakness.
  • This saw GBPUSD fall sharply back below the 1.24 handle, but given the recent focus on developing Yen strength, GBPJPY weakness was in the spotlight, having depreciated back below 190.00 and piercing the January lows at 189.34.
  • Bearish momentum has been building for this cross since the start of the year, where fiscal worries prompted a clean break of trendline support around 195.00, a level we have not been back above since. The cross narrowed the gap to within 16 pips of the December low (188.09), before recovering amid some underlying hawkish details within the BOE minutes.
  • Elsewhere, EURUSD’s firm rejection of the 50-day EMA on Wednesday keeps bearish momentum for EURJPY at the forefront of G10 FX sentiment, with the cross printing fresh recent lows of 157.24 on Thursday.
  • A more hawkish BOJ narrative and ongoing growth concerns in the Eurozone have provided headwinds, and losses now tally around 3.2% on the year. 156.18, is a key support, the Dec 3 low. The USDJPY trend needle points firmly south, with spot currently residing below 152.00, down half a percent on the session.
  • All focus turns to January’s US employment report, which will receive almost as much attention for comprehensive revisions as for the monthly nonfarm payroll gains, which are expected to slow to 170-180k from December’s strong 256k.