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Thomson Reuters
May 10 - 02:36 PM
GBP/USD - COMMENT-BoE Leaves Sterling Hanging In The Balance Vs Yen
First appeared on eFXplus on May 10 - 12:25 PM

The BoE's unexpectedly dovish stance today nL1N1SH12P hurt sterling broadly and particularly against the yen, risking a drop through crucial support by 147 and possibly its upward trend since its depths just after the 2016 Brexit vote.
Falling UK rate hike expectations nL1N1SH127 have pulled 10-year Gilt-JGB yield spreads well off this year's peaks, dragging GBP/JPY down with them. Lows this week and last at 147.03-04 probed the March 19 swing low and neared the uptrend line from last April's trough, now at 146.80.
A break below there and subsequent inability to retake the 55-WMA and weekly cloud top by 147.80 would trigger additional trend-follower sales and a dive toward this year's 144.97 bottom.
Though the BOJ is unlikely to relinquish their yield curve control policy any time soon, YCC has allowed the pace of BOJ QE to decrease because less intervention has been needed to keep 10-year JGBs near zero.
And Japan today reported its largest fiscal year current account surplus in a decade nENNI590SD.
The UK's vast current account deficit has narrowed sharply since 2015, but remains significant, as does its Brexit-threatened trade deficit nU8N1A8002.

Chart: Click here

Source:
Thomson Reuters IFR Markets

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