GBP/JPY attracts some sellers near 188.00 as BoJ official signals more rate hikes


  • GBP/JPY weakens around 188.15 in Thursday’s early European session, down 0.45% on the day. 
  • The BoJ official leaves the door open for further interest-rate hikes, lifting the Japanese Yen.
  • The upbeat UK Services PMI might help limit GBP’s losses. 

The GBP/JPY cross trades in negative territory for the third consecutive day near 188.15 during the early European session on Thursday. The Japanese Yen (JPY) strengthens as Japan’s rising real wages report reinforces market expectations for further hikes in borrowing costs.

Data released by the Ministry of Health, Labor and Welfare showed on Thursday that Japan’s Labor Cash Earnings climbed by 3.6% YoY in July, compared with a rise of 4.5% in June, beating the estimation of 3.1%. This upbeat reading has prompted speculation that the Bank of Japan (BoJ) would implement another interest rate hike before the end of 2024.

The BoJ board member Hajime Takata said on Thursday, “If the economy and prices move in line with our forecast, we will adjust policy rates in several stages.” Takata further stated that the Japanese economy recovered moderately, although some weak signs were seen. 

On the other hand, interest rate cut expectations by the Bank of England (BoE) weigh on the Pound Sterling (GBP) against the JPY. According to money market pricing data, the BoE is expected to cut interest rates once more this year, leaving borrowing costs at 4.75%. However, the publication of the UK’s latest services PMI might support the GBP and cap the downside for the cross. S&P Global showed that the UK Services PMI for August accelerated at its fastest pace since April.

Japanese Yen FAQs

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The current BoJ ultra-loose monetary policy, based on massive stimulus to the economy, has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation.

The BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supports a widening of the differential between the 10-year US and Japanese bonds, which favors the US Dollar against the Japanese Yen.

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.

 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

AUD/USD: Bulls continue to target 0.6300

AUD/USD: Bulls continue to target 0.6300

AUD/USD traded in a tight range and faltered once again just ahead of the key 0.6300 hurdle on the back of the renewed buying interest in the US Dollar and the widespread knee-jerk in the risk complex.

AUD/USD News
EUR/USD: Further gains look at 1.0600 and above

EUR/USD: Further gains look at 1.0600 and above

The weekly recovery in EUR/USD gave signs of some loss of momentum despite the pair hit new three-week highs around 1.0460 in a context dominated by the resurgence of the bid bias around the Greenback.

EUR/USD News
Gold remains on track to challenge record peaks

Gold remains on track to challenge record peaks

Gold price sticks to positive bias for the third successive day on Wednesday and trades near its highest level since November 1 above $2,750. The uncertainty around US President Donald Trump's trade policies turns out to be a key factor that continues to drive haven flows towards the precious metal.

Gold News
Dogecoin Price Prediction: Bulls target $0.40 rally as Trump officially launches Elon Musk’s DOGE

Dogecoin Price Prediction: Bulls target $0.40 rally as Trump officially launches Elon Musk’s DOGE

Dogecoin price rose 5% on Wednesday to reclaim $0.38 as Donald Trump signed the DOGE department into law. Media reports linking the Dogecoin logo to the official DOGE website sparked bullish speculations that a $0.50 breakout could be imminent. 

Read more
Netflix posts record quarter, as Trump talks tariffs on China

Netflix posts record quarter, as Trump talks tariffs on China

There has been a positive tone to risk this week, as the market digests Trump 2.0. However, Trump is not the only show in town. Earnings reports are also a key driver of stock indices, and the news is good.

Read more
Trusted Broker Reviews for Smarter Trading

Trusted Broker Reviews for Smarter Trading

VERIFIED Discover in-depth reviews of reliable brokers. Compare features like spreads, leverage, and platforms. Find the perfect fit for your trading style, from CFDs to Forex pairs like EUR/USD and Gold.

Read More

Forex MAJORS

Cryptocurrencies

Signatures