GBP/JPY maintained an upbeat bias through the early European session on Thursday and currently trades at 151.61. The “guppy” broke above its monthly high a few hours ago, reaching a peak of 151.82.
A mixture of factors catalyzed the recent bounce from the 149.75 low for GBP/JPY and continued to bolster the price on Thursday. The blistering risk-on appetite in the market weakened the demand for safe-haven assets like the Japanese yen. Meanwhile, the softer tone around the US dollar lent extra support to the GBP and sustained the bullish momentum.
GBP/JPY to Witness Possible Reversal on Lingering Omicron Varient Fears
In other news, the growing worry over the Omicron variant and the imposition of fresh restrictions in the UK has triggered doubts about the near-term recovery of the economy. The UK recorded its highest daily COVID-19 cases yesterday, with the authorities reporting an additional 78,610 cases. Meanwhile, the chief medical officer of England, Prof Chris Whitty, cautioned that the UK could record a significant spike in fresh cases in the coming few weeks.
That said, this prospect could pose significant resistance for the sterling and has capped any further gains for the GBP/JPY amid reducing possibilities of an increase in interest rate by the Bank of England (BoE). Speculators believe that the jolt from the Omicron variant could prompt the UK apex bank to hold its rate. That said, all eyes will fix on the BoE policy meeting later today.
That said, investors are likely to remain on the sidelines and shy away from placing aggressive bets on the guppy in the near term. This should stall and cap the current bullish charge in the coming hours.
Moving on, traders will likely look for cues from the December flash UK Manufacturing and Services PMI data for quick trade opportunities.
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