GBP/JPY set for solid Friday gains, but fails to hold above 153.00 as 200DMA acts as barrier

GBP/JPY upside on Friday has waned somewhat since the start of US trade, with the pair failing an earlier session attempt to break back above its 200-Day Moving Average in the 153.20s and eventually falling back below the 153.00 level. US session weakness coincided with a downturn in risk appetite (US stocks erased pre-market gains and are now in the red across the board).

Market commentators cited a waning of optimism sparked by earlier commentary from Russian President Vladimir Putin who noted “positives” in talks with Ukraine after Ukraine’s Foreign Minister said “zero” progress had been made at talks on Thursday. Western nations also announced fresh measures to punish Russia for its invasion of Ukraine and updates from the ground suggest intense fighting continues, with Russia accused of committing multiple war crimes and civilians still struggling to escape some besieged towns.

GBP/JPY still looks set to finish the day about 0.6% higher, having bounced from sub-152.00 Asia Pacific session lows, in part thanks to a much stronger than expected January UK GDP growth update. But uncertainties regarding the war in Ukraine look set to continue hanging over sentiment, suggesting a break above the 200DMA may be difficult next week.

Aside from geopolitics, GBP/JPY traders will also have to keep an eye on UK jobs data on Tuesday, followed by a BoE rate decision on Thursday and BoJ rate decision on Friday. Traders are flagging downside risks for GBP heading into next week’s meeting, with risks that the bank fails to hike rates by 25bps as markets currently expect, or offers up a much more cautious tone in its policy statement given Ukraine-related uncertainties.