GBP/JPY struggles near daily lows, around mid-134.00s
- The latest UK political developments prompt some fresh selling around the GBP.
- Fading safe-haven demand undermined the JPY and helped limit the downside.
The GBP/JPY cross now seems to have entered a bearish consolidation phase and was seen oscillating near the lower end of its daily trading range, around mid-134.00s.
After an initial uptick to levels just above the key 135.00 psychological mark at the start of a new trading week, the cross met with some fresh supply during the early European session in reaction to the UK Foreign Office Minister Sir Alan Duncan's resignation.
This coupled with the fact that some of the key Tory members - including the UK chancellor of the exchequers Phillip Hammond, stand ready to resign if Boris Johnson becomes the next British PM kept exerting some downward pressure on the British Pound.
The already weaker sentiment deteriorated further after the NIESR said that there is a 25% chance that Brexit may have already pushed the economy into a technical recession, albeit an offered tone surrounding the Japanese Yen helped limit further downside.
Given that the Japanese PM Shinzo Abe’s coalition failed to gain a supermajority in the Upper House election, a mildly positive mood around equity markets further weighed on the Japanese Yen's relative safe-haven status and extended some support.
Moreover, investors also seemed reluctant to place any aggressive bets amid absent relevant market-moving economic releases and preferred to wait on the sidelines ahead of the Tory leadership voting results, expected to be announced sometime on Tuesday.
Technical levels to watch