- GBP / JPY witnessed strong selling for the second consecutive session on Wednesday.
- A sharp spike in demand for the safe-haven JPY put pressure on the cross.
- The weaker USD, the stronger UK CPI figure supported the GBP and helped limit losses.
The crossing GBP/JPY it fell to three-week lows, around the 150.85-80 region in the last hour, although it quickly rallied a few pips thereafter.
The cross extended the previous day’s dramatic pullback from the 152.85 area, or month-long highs, and witnessed strong selling for the second straight session on Wednesday. The drop was solely sponsored by a strong rally in demand for the safe-haven Japanese yen, although the bulls showed some resistance below the 151.00 round level.
Investors remain concerned about the rapidly spreading Delta variant of the coronavirus and a global economic slowdown. Concerns were further fueled by disappointing macroeconomic data from China, which underscored recent signs of weakening economic momentum in the world’s second-largest economy. This, in turn, supports traditional safe-haven assets.
However, the JPY cut a portion of its intraday gains after Bank of Japan Governor Haruhiko Kuroda showed his willingness to further relax monetary policy if necessary. Aside from this, renewed weakness in the US dollar, coupled with higher than expected UK CPI figures, acted as a tailwind for the British pound and helped limit any further losses for the GBP / JPY cross.
However, the sustained overnight break below the important horizontal support near 151.50 favors bearish traders and supports prospects for a further short-term depreciation move. So it remains to be seen if the bulls can capitalize on the attempted recovery move or if the GBP / JPY cross encounters new bids at higher levels.