The GBP/JPY currency pair remains in negative territory for the third day in a row, trading around 188.15 during the early European session on Thursday. The Japanese Yen (JPY) has gained strength following a positive report on Japan’s real wages, which has heightened expectations for additional interest rate hikes by the Bank of Japan (BoJ).
The Ministry of Health, Labor and Welfare reported that Japan’s Labor Cash Earnings increased by 3.6% year-on-year in July, surpassing the forecasted 3.1% but lower than the previous month’s 4.5% rise. This data has fueled speculation that the BoJ may raise interest rates further before the end of 2024.
BoJ board member Hajime Takata indicated on Thursday that the central bank could adjust policy rates in several stages, provided economic and price conditions align with forecasts. Takata acknowledged a moderate recovery in the Japanese economy, although he noted some signs of weakness.
Conversely, the Pound Sterling (GBP) faces downward pressure against the JPY due to expectations that the Bank of England (BoE) may cut interest rates further. Current market pricing suggests that the BoE is likely to reduce rates once more this year, potentially lowering borrowing costs to 4.75%. However, the recent release of the UK Services PMI may offer some support to the GBP. S&P Global reported that the UK Services PMI for August accelerated to its fastest pace since April, which could help mitigate the decline in the GBP/JPY cross.
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