- GBP/JPY halts a losing streak on downbeat Japanese labor data.
- Japanese Labor Cash Earnings (YoY) reduced to 0.2% from the previous reading of 1.5%.
- Traders will likely observe BoE Governor Andrew Bailey’s speech to gain fresh impetus on the interest rate trajectory.
GBP/JPY snaps a two-day losing streak, improving to near 184.40 during the European session on Wednesday. The Japanese Yen (JPY) encountered challenges following a downbeat Japanese Labor Cash Earnings report, which indicated an annual contraction of 0.2% in November. This figure deviated from the market consensus, which anticipated a consistent rate of 1.5%. In addition, after adjusting for inflation, real wages showed a notable decline of 3.0% year-on-year. This data underscores the tough conditions faced by workers in terms of their purchasing power.
However, with falling rates of inflation in Tokyo, expectations remain firm that the Bank of Japan (BoJ) will not shift away from negative interest rates in January. This perception continues to exert downward pressure on the Japanese Yen (JPY), which in turn, supports the GBP/JPY pair.
The Pound Sterling (GBP) gains support amid expectations that the Bank of England (BoE) will stick to its stance on further rate hikes, despite easing indicators like inflation and wage growth. However, investors remain cautious due to the increasing risks of a technical recession in the United Kingdom.
According to former Bank of England monetary policy committee member DeAnne Julius, the Bank of England is unlikely to start cutting interest rates in 2024. She cited escalating tensions in the Middle East as a potential factor that could contribute to a new round of energy price increases.
Investors will closely watch BoE Governor Andrew Bailey's speech scheduled for Wednesday. Additionally, the release of UK Manufacturing Production data on Friday is anticipated, with expectations for growth in November.
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