- The overnight Brexit optimism turned out to be rather short-lived.
- The UK government was said to be downbeat on chances of a deal.
- Reviving safe-haven demand for the JPY added to intraday selling bias.
The intraday selling pressure around the British Pound picked up the pace in the last hour and dragged the GBP/JPY cross to fresh session lows, farther below the 138.00 handle.
The cross witnessed some aggressive selling on Wednesday and eroded a part of the previous session's strong gains to the highest level since late May amid fading optimism of a possible Brexit agreement. According to a UK official, the government was downbeat on chances of a Brexit deal while the Democratic Unionist Party (DUP) was said to be unlikely to support anything that is negotiable.
Brexit headlines continue to influence
Given that the UK Prime Minister Boris Johnson will need support from DUP, the incoming headlines dampened prospects for any Brexit deal at the next EU Summit starting this Thursday. The headlines exerted some heavy downward pressure on the British Pound too. This coupled with reviving safe-haven demand for the Japanese Yen further collaborated to the pair's sharp intraday slide to sub-138.00 levels.
As investors await further developments, Wednesday's release of UK consumer inflation figures for September seems unlikely to provide any impetus or produce meaningful trading opportunities. Instead, the UK CPI rather pass unnoticed amid a flurry of incoming Brexit headlines.
Technical levels to watch
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