Although the UK is potentially going to extend its lockdown measures due to a rise in COVID-19 cases, the base case for GBP strength remains. Andy Haldane, the Bank of England’s Chief Economist, said that the UK economy is going “gang busters” and that the UK is already seeing “pretty punchy” price pressures. The next BoE meeting is on June 24 and expectations are rising that the BoE will announce the start to bond tapering. The UK economy has £150 billion in pent up savings.

The JPY is a risk haven currency and typically sees weakness during times of global optimism. Global optimism is currently being fuelled by widespread vaccine hopes and that should keep the JPY pressured near term.

Medium term it would be reasonable to favour GBPJPY buyers if current market conditions remain.

Key Trade Risks:

  • A longer-term risk to this trade is from Scottish referendum talks.
  • A shorter term risk is that US yields could rise after the Fed meets tomorrow pressuring GBPUSD.