- Liz Truss wins the battle for the leadership of the Conservative Party.
- UK data: S&P Global services PMI for August revised downwards.
- The yen remains under pressure, despite risk aversion.
The crossing GBP/JPY turned positive on the day and erased losses, after recovering from the lowest level in nearly three weeks. The cross bottomed earlier in the week at 160.63 and recently hit a new daily high at 161.91.
The cross’ recovery took place as GBP/USD pulled back from multi-year lows and as USD/JPY climbed back towards the 140.50 area. The yen remains weak even as European stocks fall sharply.
The pound was not affected after the result of the Tory race that offered no surprises. Liz Truss will become the next prime minister. “I will put forward a bold plan to cut taxes and grow our economy,” Truss said in her brief acceptance speech. Regarding the energy crisis, she said that she will deal “with the energy bills of the citizens, but also with the long-term problems that we have in the supply of energy.”
Truss will become Prime Minister on Tuesday. On Wednesday, the Bank of England official will testify before a Treasury committee in Parliament. In the coming days, market participants will be watching for Truss’s comments on the BoE mandate.
Turning to economic data, the UK’s S&P Global Service PMI came in at 50.9 in August, down from the 52.5 flash estimate.
Technically GBP/JPY has been trading sideways around 161.50 since mid-August. A close below 161.00 should point to more losses, while to the upside a break above 162.50 would increase the chances of a more sustainable recovery with the initial target of 164.00.
Technical levels
Source: Fx Street
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