GBP/JPY adds to heavy intraday losses, slides further below 159.00 mark

• GBP/JPY witnessed aggressive selling on Tuesday and snapped a three-day winning streak.
• The GBP weakened across the board amid diminishing odds of any further BoE rate hikes.
• The risk-off impulse boosted demand for the safe-haven JPY and added to the selling bias.

The GBP/JPY cross added to its heavy intraday losses and weakened further below the 159.00 mark, hitting a multi-day low during the first half of the European session.

A combination of factors failed to assist the GBP/JPY cross to capitalize on its gains recorded over the past three trading sessions and prompted aggressive selling on Tuesday. The worsening global economic outlook triggered a fresh wave of the risk-aversion trade and boosted demand for the safe-haven Japanese yen. Apart from this, the disappointing release of the UK PMI prints prompted aggressive selling around the British pound and exerted additional downward pressure on the cross.

In fact, the Preliminary UK Services PMI showed a sharp deceleration of growth in May and slumped to a 15-month low level of 51.8 versus April’s final readout of 58.9 and 57.3 expected. Adding to this, the seasonally adjusted S&P Global/CIPS UK Manufacturing PMI dropped to 54.6 in May versus 55.1 expected and April’s final reading of 55.8. The data reaffirmed the Bank of England's gloomy economic outlook and forced investors to scale back bets for any further rate hikes in the near future.

This, along with the UK-EU impasse over the Northern Ireland protocol, weighed heavily on sterling and was seen as a key factor behind the latest leg of a steep decline witnessed over the past hour or so. The GBP/JPY cross plunged to multi-day low and took along some shor-term trading stops placed near the 159.00 round-figure mark. Moreover, acceptance below the 200-hour SMA supports prospects for additional losses and a slide towards testing the next relevant support near the 158.00 mark.

Technical levels to watch