GBP/JPY holds ground above 182.00 post-release of the UK employment data
|- GBP/JPY pulls back from the recent gains amid moderate UK earning data.
- UK CPI (YoY) is expected to decrease; monthly figures could report a notable increase.
- BoJ could intervene in the foreign exchange market to protect the Japanese Yen.
GBP/JPY retreats from the recent gains, trading lower around 182.10 during the European session on Tuesday. Moderate earning data from the United Kingdom could exert pressure on the Pound Sterling (GBP), which diminishes the GBP/JPY pair.
Average Earnings Excluding Bonus (3Mo/Yr) remained consistent at 7.8% in August as expected. Pay levels Including Bonus for the said quarter, decelerate at 8.1%, compared to the market consensus of 8.3%.
Investors await the UK Consumer Price Index (CPI) on Wednesday, the report is predicted to exhibit a slight decrease in the annual figure, shifting from 6.7% to 6.5%. Core CPI is projected to be at 6%, down from September's 6.2%. Despite this moderation in the annual figures, there is an anticipation of a notable increase in the monthly CPI, rising from 0.3% to 0.4%.
Such an uptick in the monthly inflation figures could fuel speculations for another interest rate hike by the Bank of England (BoE). Currently, interest rate probabilities for the BoE remain around a 50% chance of a 25 basis points hike in this cycle.
The Bank of Japan (BoJ) maintains its view that inflation is transient and has no plans to phase out its massive monetary stimulus. The dovish outlook, coupled with an overall positive risk sentiment, could continue to weaken the safe-haven Japanese Yen (JPY), suggesting that the GBP/JPY cross is more likely to trend upward.
The anticipation of Japanese authorities intervening in the foreign exchange market to bolster their currency adds downward pressure for the GBP/JPY pair.
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