MUFG Research discusses GBP/JPY outlook and adopts a bearish bias in the near-term, flagging a scope for downside toward the flash crash intra-day low of 131.70.
"The drop in the Construction PMI yesterday in the UK made for grim reading and reinforces the prospect of a contraction in real GDP in the UK in Q2. The Construction PMI fell from 48.6 to 43.1 in June, the worst reading since 2009. With manufacturing activity also being hit by Brexit and uncertainty and the broader global slowdown, it really is only the consumer keeping the economy afloat," MUFG notes.
"The yen remains our favoured currency at present and the global growth/Brexit mix suggests GBP/JPY still has plenty of scope to the downside from here. The test of the flash crash intra-day low of 131.70 is looking increasingly achievable given yesterday close was the lowest since 2016," MUFG adds.