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Wednesday, November 30, 2022

GBP/JPY retreats from multi-week highs near 164.50 . is offered

GBP/JPY retreats from multi-week highs near 164.50 .  is offered

  • GBP/JPY gains traction for the sixth day in a row and hits a nearly three-week high.
  • The UK government’s spin on planned tax cuts continues to support the British pound.
  • The risk-taking environment weighs on the yen, which is a safe haven, and contributes to appreciation.

Crossing GBP/JPY This is supported by last week’s strong recovery from its lowest level since February 2021 and higher for the sixth consecutive day on Tuesday. However, some intraday gains are trimmed to reach nearly three-week highs and pull back towards 164.50 in the middle of the European session.

Investors welcomed the change in the UK government’s course from the controversial tax cut scheme announced in its mini-budget last week. In addition, the Bank of England reaffirmed its willingness to buy gilt up to £5 billion over the long term, which continues to act as a tailwind for the pound sterling and the GBP/JPY cross.

The Japanese yen, on the other hand, has been hurt by the dovish tone adopted by the Bank of Japan, marking a wide divergence from other major central banks. This, along with the risk appetite, is weighted on the safe-haven yen and provides additional boost to the GBP/JPY cross.

For his part, Japan’s Finance Minister Shunichi Suzuki said on Monday that the country was ready to take decisive action in the foreign exchange market if the yen’s extreme volatility continues. This, in turn, helps limit losses to the yen and keeps the GBP/JPY cross away, at least for now.

Technically, sustained overnight strength above the 163.00 supply area, which coincides with the 100-day SMA, favors the bulls and supports the chances for further gains. Therefore, any significant pullback can still be viewed as a buying opportunity and remain limited.

technical level to watch

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