GBP/JPY trims a part of heavy intraday losses led by yen intervention news, BoE in focus
- GBP/USD comes under intense selling pressure on news of Japan’s intervention in the FX market.
- A solid intraday recovery in the British pound offers some support and helps limit the downside.
- The market focus remains glued to the crucial BoE monetary policy decision due on Thursday.
The GBP/JPY cross witnessed a dramatic intraday turnaround on Thursday and tumbles nearly 500 pips from the daily high touched during the early European session. The sharp downfall drags spot prices closer to mid-159.00s, or its lowest level since early August and is exclusively sponsored by a massive rally in the Japanese yen.
Japan's top currency diplomat Masato Kanda confirmed this Thursday that the government has intervened in the FX market, which, in turn, prompts aggressive short-covering around the JPY. This, to a larger extent, overshadows the Bank of Japan's dovish stance and turns out to be a key factor exerting heavy downward pressure on the GBP/JPY cross. It is worth recalling that the Japanese central bank decided to leave its policy settings unchanged and vowed to keep purchasing bonds so that 10-year yields remain pinned at zero.
The British pound, on the other hand, stages a solid bounce amid some repositioning trade ahead of the crucial Bank of England policy decision and a sharp US dollar pullback from a two-decade high. This offers some support to the GBP/JPY cross and assists spot prices to quickly bounce back above the 160.00 psychological mark. It, however, remains to be seen if bulls can capitalize on the attempted recovery or Thursday's steep fall marks a bearish breakdown, which might have already set the stage for a further depreciating move.
Technical levels to watch