GBP/JPY cheers fresh risk aversion amid UK political drama

• GBP/JPY takes the bids as the market’s risk-on gain additional support from FT headlines.
• Labour’s Lindsay Hoyle to replace John Bercow as the Speaker of the UK’s House of Commons.
• Nigel Farage keeps Tories on their toes while allegations on PM Johnson also highlight British politics ahead of UK Services PMI.

With the United States (US) seems to consider China’s latest demands for the “Phase One” deal, the market’s risk-on sentiment got additional boost off-late and favors the GBP/JPY pair to flash 140.10 during Tuesday’s Asian session.

Following the Politico’s news that China is pushing the US for heavy reversal of tariff hikes for a successful trade deal, the Financial Times (FT) recently rolled out that the US administration officials are mulling whether to remove some existing tariffs on Chinese goods as a concession to seal a partial deal that would pause the trade war with Beijing as early as this month.

The same is likely adding strength to the already prevailing risk-on sentiment, which in turn adds strength to the US 10-year treasury yields that flash a 1.798% mark after rising more than six basis points the previous day.

On the political front, Labour party member Sir Lindsay Hoyle is recently elected to replace John Bercow as the Speaker of the House of Commons in the United Kingdom (UK). Allegations are on the hike that the Prime Minister (PM) Boris Johnson presided over a cover-up concerning Russian infiltration in British politics, including the Conservative party, as per the Guardian. The news also says that the Downing Street indicated on Monday that it would not allow a 50-page dossier from the intelligence and security committee to be published before the election, prompting a string of complaints about its suppression.

Furthermore, Brexit party leader Nigel Farage seems to challenge the market's increasing optimism surrounding the Tory leader Johnson’s victory in the December month snap election. The hard Brexiteer unveiled 600 Brexit arty candidates who could split the Leave vote and scupper Boris Johnson’s chances of electoral victory as per the Independent.

While the return of Japanese traders after the Culture day holiday will highlight risk events’ impact, UK Services PMI, expected 49.7 versus 49.5 prior, are likely the key economic data to watch for the day.

Technical Analysis

Nearly three-week-old falling trend line around 140.50 seems to question the immediate upside of the pair ahead of highlighting October month top close to 141.50. On the downside, June month high near 138.30 and October 11 top surrounding 137.90 can entertain short-term sellers.