GBP/JPY tumbles towards 167.00 amid Brexit woes, sluggish yields

• GBP/JPY extends the previous day’s pullback from six-year high.
• Fears of NIP alteration join political chaos in the UK to favor sellers.
• Yields struggle amid market’s anxiety ahead of the US inflation.
• Japan policymakers’ meeting to discuss global financial markets will direct immediate moves.

GBP/JPY sellers attack 167.00, intraday low 167.16, heading into Friday’s London open. The cross-currency pair’s latest weakness could be linked to the pessimism in the UK, as well as a lack of action in the bond markets.

It’s worth noting that the poor signals concerning the UK’s employment situations exert immediate downside pressure on the quote. “British employers added staff in May at the slowest pace since early 2021, according to a survey that adds to signs that the labor market is losing some of its heat,” said Reuters. The news cites a measure of permanent staff hiring, by accountants KPMG and the Recruitment and Employment Confederation (REC), to portray the recently downbeat employment conditions in the UK. That said, the private employment gauge fell for the sixth consecutive month to 59.2, 59.8 flashed in April but remained above the 50 threshold for growth.

Additionally, UK PM Boris Johnson’s readiness to unilaterally repeal the Brexit deal concerning the Northern Ireland Protocol (NIP), as well as the European Union’s (EU) warning to levy harsh sanctions and cut trade ties with Britain, also weigh on the GBP/JPY prices.

On Thursday, UK PM Johnson tried to regain the market’s confidence after successfully overcoming the no-confidence vote. However, traders remain skeptical over Britain’s economic conditions amid Brexit, covid and the Russia-Ukraine tussles.

On a broader front, fears concerning China’s covid conditions and faster/heavier rate hikes, as well as their negative economic repercussions, weigh on the market sentiment of late, which in turn exert downside pressure on the GBP/JPY prices.

Amid these plays, the stock futures from the US print mild gains whereas those from Europe print losses by the press time. That said, the US 10-year Treasury yields remain sidelined near 3.05% after refreshing the monthly high the previous day.

Looking forward, a meeting of Senior Officials from the Bank of Japan (BOJ), Japan’s Ministry of Finance (MOF) and the Financial Services Agency (FSA), at 07:00 GMT, to discuss global financial markets, will be important for the GBP/JPY traders.

Above all, the US CPI will be crucial to watch for the market players amid expectations of no change in the headline figure of 8.5% YoY. However, the White House has already signaled a higher number, which in turn could propel the yields and recall the GBP/JPY buyers in case of strong inflation data.

Technical analysis

GBP/JPY pair’s failure to provide a daily closing beyond April’s top, surrounding 168.50, triggered the quote’s pullback the previous day. However, an upward sloping support line from May 24, near 165.15 by the press time, challenges the short-term downside of the pair.