GBP/JPY struggles near monthly low, eyes 154.00 amid escalating geopolitical tensions

• A combination of factors dragged GBP/JPY to a fresh monthly low on Thursday.
• Russia-Ukraine war spooked investors and boosted demand for the safe-haven JPY.
• Reduced bets for a 50 bps BoE rate hike at the March meeting undermined the GBP.

The GBP/JPY cross remained depressed through the first half of the European session and was last seen trading just a few pips above the monthly low, around the 154.40 region.

The cross extended the previous day's sharp pullback from the weekly high, around the 156.75-156.80 region and witnessed heavy selling for the second successive day on Thursday. This also marked the fifth day of a negative move in the previous six and was sponsored by a combination of factors.

Russia's invasion of Ukraine triggered a fresh wave of the global risk-aversion trade and boosted the Japanese yen's safe-haven status. The anti-risk flow also benefitted the US dollar, which weighed on the British pound and further contributed to the heavily offered tone surrounding the GBP/JPY cross.

NATO confirmed that an official invasion of Ukraine has begun. Moreover, reports indicated that Russian forces attacked the Ukrainian border around Belarus and also fired missiles at several Ukrainian cities. The headlines weighed on investors' sentiment and led to a steep decline in the equity markets.

The geopolitical developments could dampen prospects for a 50 bps rate hike by the Bank of England at its March meeting. This was seen as another factor that undermined sterling and further exerted downward pressure on the GBP/JPY cross, though oversold RSI on hourly charts might help limit losses.

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