- GBP / JPY came close to testing the February 2020 high at 144.96 on Friday.
- Friday was backed by appetite for risk, but vaccine progress in the UK has been a headwind in recent weeks.
The GBP/JPY saw a second day of rally on Friday, with this latest bout driven mainly by a weakening of the Japanese yen as a result of the general market risk tone; Equity markets, industrial commodities, crude oil prices and risk-sensitive currencies are doing well, while the safe-haven US dollar is lower. This weighs on the yen today and is driving the GBP / JPY
As a result, the GBP / JPY has been hitting new highs over the year and the last few were one step away from a test of the February 2020 high at 144.96 and the psychological level of 145.00. Strong gains on Thursday and Friday this week sent GBP / JPY up 2.5% on the year.
As a summary; in terms of why the GBP rallied on Thursday; a less dovish-than-expected Bank of England monetary policy meeting on Thursday saw the GBP rise; the bank left interest rates and the size of its QE program unchanged, but its economic projections were a bit more optimistic and, although the bank noted that negative rates would be ready in the next six months, they categorically should not be taken as a signal. that the bank definitely plans to use them.
Driving the day
As noted, risk is the main factor driving GBP / JPY higher on the last trading day of the week. In terms of why the markets are at risk; Today’s US employment report, while weak, is taken as positive as it increases pressure on the US Congress to act aggressively with stimulus (a strong report could have reduced its sense of urgency). Of course, it will also encourage continued Fed restraint, the combination of which is positive for risk assets and negative for JPY.
However, the news flow from the UK is still quite positive; the country has vaccinated almost 11 million people and has an average of half a million injections per day. The latest news suggests that the country will be able to offer coups to all of its adult citizens in June. This calendar is well ahead of the United States and even further ahead of the EU. This has been a tailwind for the British pound, which has also been helped by further confirmation that the third wave Covid-19 has peaked and the economy will be on its way back toward reopening in lieu of restrictions. more stringent (as in Europe).
Key levels
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