The GBP/JPY pair is trading around 184.50 during European hours on Tuesday, recovering from its lowest level of 180.10 since January, recorded on Monday. The rebound faces headwinds as the Japanese Yen (JPY) gains strength on growing expectations of further monetary policy tightening by the Bank of Japan (BoJ).
On Tuesday, Japan’s Chief Cabinet Secretary Yoshimasa Hayashi announced that wage increases are anticipated to extend to part-timers and small businesses by autumn, supported by strong Shunto results and minimum wage hikes. However, Hayashi did not comment on foreign exchange levels.
Japan’s Labor Cash Earnings reported a 4.5% year-on-year increase in average income for June, surpassing both the previous 2.0% and the expected 2.3% figures. This marks the highest increase since January 1997, reinforcing Japan’s move towards a rising interest rate environment.
Meanwhile, the Pound Sterling (GBP) is underperforming amid dismal market sentiment, reducing the appeal of risk-sensitive assets. Growing tensions in the Middle East and fears of an economic slowdown in the United States have increased the demand for safe-haven assets like the Japanese Yen, thereby pressuring the GBP/JPY pair.
The British Pound also faced difficulties as the Bank of England (BoE) delivered a widely anticipated 25-basis point rate cut at its August meeting last week.
In the UK, the BRC Like-For-Like Retail Sales rose 0.3% year-on-year in July, reversing a 0.5% decline in June and meeting market expectations. Traders are now awaiting the S&P Global/CIPS Construction PMI for July to gauge business activity in the UK’s construction sector.
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