GBP/JPY: Downside risk from Brexit and negative rates – MUFG

Analysts at MUFG Bank maintain a short GBP/JPY trade idea in anticipation that the weakness in the pound will extend further in the near-term. They see a target in the cross at 126.60 with a stop loss at 134.10. 

Key Quotes: 

“Over the past week the GBP has continued to underperform. It was the third worst performing G10 currency over the past week, and by far the worst this month. The pound continues to be undermined by negative Brexit headlines, and ongoing speculation that the BoE (Bank of England) could introduce negative rates. The fourth round of Brexit trade talks take place next week. The mood music heading into the talks has not been good.”

“The BoE has signalled clearly that they are reviewing further policy options including negative rates. While we do not expect negative rates to be implemented, the uncertainty is set to persist as a weight on the pound in the near-term.”