GBP/JPY licks its wounds near 166.00 following the heaviest slump in three weeks, BOE’s Bailey eyed

• GBP/JPY remains sidelined after falling the most since early November.
• Risk-aversion, fears surrounding labor strikes in UK weighed on the prices.
• Japan data, BOE Governor Bailey’s speech will direct intraday moves, bears may keep the reins amid sour sentiment.

GBP/JPY stays defensive around 166.00 during early Tuesday, after posting the biggest daily loss in three weeks the previous day. In doing so, the cross-currency pair portrays the market’s inaction, or a search for more clues, following a negative start to the key week.

Looming fears of public servants’ nationwide strike in the UK joined British Prime Minister (PM) Rishi Sunak’s readiness to jostle with China and the Covid woes emanating from the dragon nation to weigh on the GBP/JPY prices the previous day. On the same line could be the downbeat prints of the Confederation of British Industry's (CBI) latest Distributive Trades Survey for November.

As per the latest readings, published on Monday, the CBI Retail Sales for November printed -19 figures versus +18 prior while the gauge showing the Expected Retail Sales for December slumped to the lowest since March 2021, to -21 versus -9 previous readings.

UK PM Rishi Sunak’s indirect attack on Chinese policies joined British Foreign Secretary James Cleverly’s statements pushing Beijing to take note of the lockdown protests to highlight the recently sour terms between Britain and China. On the other hand, “Hundreds of demonstrators and police clashed in Shanghai on Sunday night as protests over the restrictions flared for the third day and spread to several cities, with police on Monday stopping and searching people at the sites of weekend protests in Shanghai and Beijing,” reported Reuters.  The news joins the all-time high of daily virus infections from the dragon nation to weigh on the sentiment.

Against this backdrop, Wall Street closed in the red and the US Treasury yields improved after an initial slump.

Looking forward, Japan’s Retail Trade and employment numbers for October can offer immediate directions to the GBP/JPY pair traders ahead of a speech from the Bank of England (BOE) Governor Andrew Bailey.

That said, the risk-off mood could gain additional support from BOE’s Bailey and may drown the pair further toward the south amid the recent wave of speculations supporting easy rate hikes.

Technical analysis

A daily closing below the 21-DMA, around 166.90 by the press time, directs GBP/JPY bears towards a seven-week-long ascending support line, near 164.80 at the latest.