GBP/JPY almost flat ahead of Carney’s speech and renewed concerns about Brexit

Analysis General

Published: 2/19/2018 11:47:00 AM

GBP/JPY is now trading around 148.95 in  the European Session, almost flat (-0.03%) in a holiday-thinned market on late Monday as the US is off today. Apart from Friday’s muted UK retail sales, GBP came under stress on renewed concerns about an orderly Brexit.

There was practically zero progress last week on the Brexit saga, except for various permutations and combinations: The UK’s IOD has put forward a bespoke Brexit solution which it believes will protect manufacturers from customs chaos but also allow the UK to strike independent trade deals.

On the other side, EU's Barnier said “UK red lines close the door to a Swiss or Norway model for Brexit. The UK is responsible for resolving Irish border issue; UK not currently heading towards a disorderly exit as the majority of UK politicians want an orderly exit”.

Elsewhere, German Chancellor Merkel said, “Germany wants Constructive Partnership with UK Post-Brexit and stick to Brexit timetable”. British PM Theresa May said, “Britain wants UK-German businesses to have maximum freedom possible to trade in each other's markets; to speak on post-Brexit economic ties in coming weeks”.

On Monday, UK PM Theresa’s spokesman commented that UK wants to have “basis” of a post-Brexit trade deal with the EU by October’18: “Recent series of speeches by UK ministers shows that the government is setting out what it wants to achieve from a future partnership with EU”.

But the market may be not so much confident about intentions of UK politicians in this great political game of Brexit.

Earlier EU negotiator has said that a trade deal with the UK won't’s be finalized before the exit day. Instead, there will be an "annex" inside the withdrawal agreement which will set out what a future relationship might look like, to be thrashed out during the transitional period while current rules remain in place and the right of EU citizens to move freely must remain throughout the interim period.

These are exactly the issues, which Theresa May, the UK PM has previously ruled out.

Separately, a UK survey, called Household Finance index done by IHS Markit, showed that financial well-being fell to a 7-month low of 42.2 in February from 42.9 in January; 60% of UK households expect the Bank of England  to hike rates within the next six months (from 45% previous month)

As par HIS- "The latest survey adds to evidence that UK households have seen an erosion of their financial wellbeing so far this year, with stubbornly high inflation the main factor placing pressure on consumer budgets”.

All eyes may be now on BOE’s Governor Carney’s delayed speech and subsequent Q&A session to see if he can clarify his/MPC position about any rate hike next month or pour some cold water on the rate hike expectations amid muted UK consumer spending and subdued real wages growth.

On the other side, the Yen lost some strength on Friday after tje Japanese government said that it is watching Yen´s move with “greater” sense of concern and is ready to act when actually needed. The Yen is also under some pressure on mixed economic data and  the reappointment of Kuroda as BOJ chief.

Technically, GBPJPY has now support of 148.75-147.95 area and for any strength, it has to sustain above  the 150.00-150.85 price zone.

Tag: General
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