GBP/JPY bears the burden of coronavirus updates with eyes on UK data/budget
- GBP/JPY keeps the bearish tone intact despite bounce off the previous day.
- Fresh headlines concerning coronavirus reverse the previous risk rebound.
- UK Manufacturing/Industrial Production, the first post-Brexit budget will be the key.
GBP/JPY fails to carry the previous day’s recovery moves while declining to 135.40, down 0.7%, during the initial Tokyo session on Wednesday. While renewed fears of the coronavirus (COVID-19) seem to weigh on the risk-tone, traders are also cautious ahead of the key UK data/events.
The latest surge in coronavirus statistics from Japan and South Korea follows the early-Asian rise in the US numbers as well as infection to the UK Health Minister. Additionally, the Politico raised doubts over US Vice President Mike Pence’s previous assurance of enough resources in the lab whereas China’s Global Times said, “officials including President Donald Trump and some in the public still seek to downplay the risk of the deadly virus.”
While the aforementioned catalysts were the latest to weigh on the market’s trading sentiment, an absence of US President Donald Trump’s press conference and fresh fears of postponing the Tokyo Olympics could be cited as the earlier catalysts.
As portraying the risk-tone, the US 10-year treasury yields drop two basis points to 0.73% while Japan’s NIKKEI slip 0.60% to 19,755 by the press time.
It should also be noted that the UK Express conveyed that the European Union (EU) Brexit negotiator Michel Barnier has admitted the bloc is scrambling to put together a legal text in advance of next week's crunch talks after it was revealed UK negotiators were ahead of the game.
Traders will now observe the monthly UK economics ahead of the key British budget, the first after Brexit, to determine near-term market direction. “In the UK, a busy data calendar features Jan estimates of GDP (f/c 0.1% 3mth/3mth), industrial production (f/c -2.6%yr), the trade balance and construction output. Most eyes though will be on the budget of brand new Chancellor Rishi Sunak at 12:30GMT. There should be a mixture of tax changes, increased spending on health and infrastructure and an increase in tax on foreign property buyers,” said Westpac.
Technical Analysis
A short-term falling trend line, currently at 136.73, followed by a 10-day SMA level near 137.50, restricts the pair’s immediate recovery. Meanwhile, 134.00 seems to be on the bears’ radar during the further declines.