In Thursday’s early European session, the GBP/JPY pair is trading around 188.15, down 0.45% on the day. The Japanese Yen strengthens as positive data on Japan’s real wages fuels expectations of further interest rate hikes. On the other hand, the Pound Sterling is weighed down by expectations of a rate cut by the Bank of England.
Japan’s Labor Cash Earnings rose by 3.6% YoY in July, beating expectations and raising speculation that the BoJ might implement another rate hike by the end of 2024. BoJ board member Hajime Takata indicated a willingness to adjust policy rates if economic conditions align with forecasts.
Meanwhile, the BoE is expected to cut rates further this year, dampening the GBP against the JPY. However, the UK Services PMI for August showed strong growth, which could support the Pound and limit downside for the GBP/JPY cross.
Analysis:
The GBP/JPY pair is facing downward pressure as the Japanese Yen strengthens on positive economic data and expectations of further rate hikes. On the other hand, the Pound Sterling is weighed down by expectations of a rate cut by the Bank of England. The upcoming UK Services PMI release could provide support for the GBP and limit losses against the JPY.