GBP/JPY drops to fresh daily low, around mid-153.00s ahead of UK PMIs

• GBP/USD struggled to preserve modest intraday gains and retreated sharply from the 154.20 area.
• COVID-19 jitters benefitted the safe-haven JPY and exerted pressure amid persistent Brexit woes.
• Prospects for an imminent BoE rate hike helped limit deeper losses ahead of the flash UK PMIs.

The GBP/JPY cross witnessed heavy selling during the early European session and dropped to a fresh daily low, around mid-153.00s in the last hour.

The cross gained some positive traction during the early part of the trading action on Tuesday, albeit struggled to capitalize on the move and met with a fresh supply near the 154.20 region. The sharp intraday pullback lacked any obvious fundamental catalyst and could be solely attributed to a strong pickup in demand for the Japanese yen.

Concerns over the rising number of COVID-19 cases in Europe and the reimposition of restrictive measures tempered investors' appetite for perceived riskier assets. This, in turn, was seen as a key factor that prompted aggressive short-covering around the safe-haven JPY and led t the GBP/JPY pair's latest leg of a sudden fall in the past hour.

On the other hand, the impasse over the post-Brexit arrangement in Northern Ireland and fishing rights continued acting as a headwind for the British pound. This was seen as another factor exerting some pressure on the GBP/JPY cross. However, expectations for an imminent interest rate hike move by the Bank of England in December helped limit losses.

Market participants now look forward to the release of the flash UK PMI prints for November, which might influence the sterling and provide some impetus to the GBP/JPY cross. Apart from this, traders will further take cues from Brexit-related headlines and developments surrounding the coronavirus saga to grab some short-term opportunities around the cross.

Technical levels to watch