GBPJPY Tries to Regain Bullish Footing as Brexit Enters Crunch Week
GBPJPY was higher by 0.70% on Monday despite the threat of a No Deal Brexit still hanging over the pound. The European Union failed to agree to terms with the U.K. at last week’s EU summit and the future path of Britain’s exit from the bloc is still cloudy.
The failure of last week’s talks has seen Boris Johnson pivot from a Candian-style deal to an Australian-style agreement, whilst warning businesses to prepare for a No Deal exit. Michael Gove said yesterday that the door was still ‘ajar’ for talks to resume, however, U.K. Housing Secretary Robert Jenrick risked inflaming tensions with the Eurozone again by saying the union’s negotiators were being ‘immature’ by failing to compromise.
Bank of England Governor Andrew Bailey was speaking on Sunday and has given more hints about the bank’s attitude to negative interest rates. Bailey said that negative rates were often most effective when economies were already in an economic recovery.
“Our assessment of negative interest rates, from the experience elsewhere, is that they probably appear to work better in a more wholesale financial market context, and probably better in a nascent economic upturn”.
The comments should give traders further belief that the bank may be about to push U.K. rates into negative territory and this could happen after any initial volatility caused by a No Deal Brexit. The bank next meets to discuss policy on November 5th, but expectations are for rates to remain on hold with a potential boost to the bank’s bond-buying program.
GBPJPY Technical Outlook
GBPJPY has bounced from the 136.00 in what looks like a reversal pattern. This should see the pair test the 50-day moving average over the next few days. There is potential to move beyond that level towards the 140.00 mark, but the Brexit headlines would make it a risky long. 135.50 would be a stop loss area. The Investing Cube team is currently available to help all levels of traders with the Forex Trading Course or one-to-one coaching.