Market Analysis
The GBP/JPY pair remains under pressure for the third consecutive day, trading near 188.15 during the early European session on Thursday. The Japanese Yen (JPY) has strengthened following Japan's real wages report, which has fueled market speculation of further interest rate hikes.
According to data from Japan's Ministry of Health, Labor, and Welfare, Labor Cash Earnings rose by 3.6% year-on-year (YoY) in July, down from June's 4.5% but exceeding the forecast of 3.1%. This positive figure has increased expectations that the Bank of Japan (BoJ) may raise interest rates again before the end of 2024.
BoJ board member Hajime Takata commented on Thursday, "If the economy and inflation follow our projections, we will adjust policy rates in stages." Takata also noted that while Japan's economy has shown moderate recovery, some signs of weakness remain.
In contrast, the Pound Sterling (GBP) faces downward pressure due to growing expectations of a Bank of England (BoE) interest rate cut. Money market data suggests the BoE may reduce rates once more this year, bringing borrowing costs to 4.75%. However, the latest UK Services PMI could provide some support for the GBP, potentially limiting further losses for the pair. S&P Global reported that the UK's Services PMI for August grew at its fastest rate since April.
Paraphrasing text from "FX Street" all rights reserved by the original author.