GBP/JPY stays depressed below 155.00 as yields ease on Ukraine fears

GBP/JPY remains sidelined around 154.70 during Thursday’s Asian session, mildly offered after bouncing off a 10-week low the previous day. The cross-currency pair’s latest weakness could be linked to the market’s anxiety ahead of key data/events, as well as a lack of major catalysts. Cautious optimism from an anticipated round of peace talks between Russia and Ukraine battles increasing hopes of a faster rate-hike trajectory by the Fed to test the market sentiment of late.

A Russian negotiator was quoted to share the news of a probable round of diplomatic talks on Thursday. On the same line, Interfax also mentioned, “A potential ceasefire will be discussed in upcoming talks with the Ukrainian delegation.” It’s worth noting that a jump in the probabilities of a 0.50% rate hike in the March Fed meeting, per CME’s Fed Watch Tool, also challenges the market’s optimism. On the same line were the US inflation expectations that rose to a 15-week high, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data.

Elsewhere, global rating agencies like Moody’s and Fitch cut Russia’s ratings and contribute to the offbeat sentiment. At home, the Daily Express quotes data showing a jump in the EU nationals in the UK to shrug off Brexit criticism. Further, UK PM Boris Johnson spoke to Ukrainian President Volodymyr Zelenskiy and said, he will publish ‘full list of all those associated with the Putin regime’ per The Guardian. Additionally, Bank of England (BOE) policymakers, including Silvana Tenreyro and Jon Cunliffe, cited economic risks emanating from Russia’s invasion of Ukraine.

On the same line, Bank of Japan (BOJ) monetary policy board member Junko Nagaya said in a statement on Thursday, “Japan’s economic outlook remains highly uncertain from January onward.” Amid these plays, S&P 500 Futures print mild losses whereas the US 10-year Treasury yields also drop 1.2 basis points (bps) to 1.85% by the press time.

Moving on, the UK’s final reading of Services PMI for February, expected to confirm 60.8 figure, will decorate the calendar. However, major attention should be given to geopolitical headlines for clear directions.