GBP/JPY drops to mid-152.00s, fresh session lows

The GBP/JPY cross witnessed some selling during the first half of the European session and dropped to fresh daily lows, around mid-152.00s in the last hour.

The cross struggled to capitalize on its early uptick to multi-day tops, instead met with some fresh supply near the 153.25 region and eroded a part of Friday's strong gains of over 200 pips. Renewed Brexit jitters, along with COVID-19 woes acted as a headwind for the British pound and exerted some pressure on the GBP/JPY cross.

In the latest Brexit-related developments, Brussels and London were locked in a dispute over the size of the UK’s Brexit bill. The EU suggested that Britain would be obliged to pay €47.5bn (£40.8bn) as part of its post-Brexit arrangements. On the coronavirus front, the UK reported the highest number of infections in over five months.

Adding to this, the UK Vaccines Minister Nadhim Zahawi told BBC TV on Sunday that the government plans to issue guidance that people should still wear masks in many indoor settings. UK Prime Minister Borish Johnson is due to confirm on Monday whether most of the lockdown rules - including the legal requirement for masks - will end on 19 July.

Meanwhile, concerns about the economic fallout from the spread of the highly contagious Delta variant of the coronavirus continued weighing on investors' sentiment. This was evident from a sharp fall in the US equity futures, which underpinned the safe-haven Japanese yen and contributed to the GBP/JPY pair's sudden fall over the past hour or so.

In the absence of any major economic releases on Monday, developments surrounding the coronavirus saga will continue to influence the broader market risk sentiment. This, in turn, will drive demand for the safe-haven JPY and produce some short-term trading opportunities around the GBP/JPY cross.

Technical levels to watch