GBP/JPY Rebounds Following Sudden Risk-Averse Price Dump

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The GBP/JPY pair is on a steady recovery path from its recent slump to the 155.30 low on Monday and currently sits around the 156.60 line.

However, the ‘dragon’ has struggled to post any meaningful move above the 157.00 mark since its rebound as the selling pressure around the pair persisted, amid the growing tensions over the Russia-Ukraine standoff. In the latest, western nations recently warned that it was seeing no signs of de-escalation as promised by the Russian side.

Meanwhile, Russian media reported today that rebels in eastern Ukraine have fingered government forces of bombing their territory. This report sparked a sharp drop in the global equity markets as it fostered a fresh wave of risk-aversion in traders. As expected, the Japanese yen benefited from the prevailing risk mood on the global markets thereby exerting additional pressure on the GBP/JPY pair.

 

That said, the bearish investor sentiment around the British pound did not last long after new developments showed that the alleged incident took place within the contested area of Donbas. Meanwhile, growing expectations for a Bank of England (BoE) rate hike helped stabilize sterling. This explains the bullish sentiment barrier seen around the 156.00 area.

GBP/JPY Traders On the Sidelines Amid Drought of Market-Moving Data

Following a positive UK wage growth figure on Tuesday, better-than-expected UK inflation numbers released yesterday bolstered investors’ anticipation for a 50 basis point rate hike at the MPC meeting in March. Also, the annual UK inflation figure, based on the CPI standings, rose for the thirteenth consecutive month to record its highest point in about three decades.

That said, amid an absence of market-moving data around the British pound or yen, traders would do themselves better to await a follow-through move towards the upside to place aggressive bullish bets.