GBP/JPY: On the back foot below 153.00 on Brexit, covid woes

GBP/JPY remains depressed, recently sidelined around 152.60-75, amid initial Asian session trading on Wednesday. The cross-currency pair dropped the most since June 18 the previous day amid risk-off mood and downbeat headlines concerning the Brexit and the coronavirus (COVID-19) conditions for the UK. However, a lack of major data/events restricts the quote’s latest moves.

European Commission Vice President Maroš Šefčovič warned the UK of legal proceedings if the UK fails to recall the Brexit agreement on Northern Ireland (NI). On the other hand, Lindsay Croisdale-Appleby, the UK’s ambassador to the European Union (EU) said, the UK’s issues with post-Brexit border fix were far wider and deeper than the bloc’s, per the Express. The news also mentions the British diplomat, “I think that the challenge is to make sure that the Belfast Good Friday Agreement survives, frankly, and to make sure that the institutions in Northern Ireland stay strong.”

Elsewhere, the UK’s coronavirus (COVID-19) infections jumped to 28,773, the highest since late January and Health Minister Sajid Javid does expect the numbers to jump going forward. Even so, the newly appointed diplomat backs PM Boris Johnson’s July 19 deadline for unlocking Britain. It’s worth noting that the UK’s Office for Budget Responsibility (OBR) cites the COVID-19, rising debt and climate crisis as a triple threat for the nation. The member of the country’s fiscal watchdog also said, per Reuters, “Britain's economic recovery from its coronavirus lockdowns has been stronger than expected but it is too early to judge how much long-term damage has been done by the pandemic.”

On a broader front, fears of the covid variant called Epsilon and Lambda, not to forget the doubts over vaccines’ ability to tame some of the latest strains, also weigh on the market sentiment and backed the Japanese yen’s safe-haven demand.

It’s worth noting that the Asian major also struggles with the covid and is up for an extended lockdown in the key prefectures including Tokyo. Japan also eyes another budget to battle the pandemic.

Amid these plays, US 10-year Treasury yields dropped the most since late February while Wall Street closed mixed on Tuesday. That said, the S&P 500 Futures print 0.10% intraday loss by the press time.

Considering a lack of major data/events, GBP/JPY may extend the prevailing downtrend while keeping eyes on the Brexit and covid headlines.

Technical analysis

Despite printing a notable reversal from 50-DMA, around 153.95, GBP/JPY bears need to break the 100-DMA support of 152.18 to keep the reins.