British Pound holds gains vs JPY after UK jobs data; lacks bullish conviction ahead of BoE

GBP/JPY stages a goodish intraday recovery from a one-and-a-half week low set earlier today.
Spot prices get an additional lift following the release of mostly upbeat UK employment data.
The UK-Japan rate differential remains supportive of the move up ahead of the BoE decision.

Haresh Menghani FXStreet

The GBP/JPY cross builds on its steady intraday recovery from a one-and-a-half-week low, touched earlier this Thursday, and reclaims the 214.00 mark following the release of the UK monthly employment details.

The UK Office for National Statistics (ONS) reported that the ILO Unemployment Rate unexpectedly edged lower from 5.0% to 4.9% in the three months to April. Furthermore, Average Earnings, excluding Bonus, grew by 3.4% YoY during the three months to April versus estimates for a 3.2% rise, while Average Earnings, including Bonus, climbed 4.4% during the reported period, also surpassing the consensus forecast of 4.0%. This offsets a rise in the number of people claiming jobless benefits from a revised 8.3K to 31.2K in May, providing a modest lift to the British Pound (GBP) and the GBP/JPY cross.

The Japanese Yen (JPY), on the other hand, continues with its relative underperformance in the wake of a persistently wide rate differential between Japan and other major economies, including the UK. This keeps the carry trade active and overshadows the Bank of Japan's (BoJ) historic rate hike on Tuesday, to the highest level since 1995, and turns out to be another factor acting as a tailwind for the GBP/JPY cross. Meanwhile, the JPY bears remain on high alert amid speculations that Japanese authorities will step in again to prop up the domestic currency, which might cap further upside for the currency pair.

In fact, Japan's top foreign exchange diplomat, Atsushi Mimura, and Finance Minister Satsuki Katayama have issued repeated warnings that Tokyo is monitoring speculative moves and remains fully prepared to curb further JPY weakness. Traders might also refrain from placing aggressive directional bets around the GBP/JPY cross and opt to wait for the crucial Bank of England (BoE) policy update later today amid diminishing odds for a more aggressive policy tightening. In fact, BoE rate hike bets cooled following the release of softer-than-expected UK consumer inflation figures on Wednesday.

Heading into the key central bank event risk, the aforementioned mixed fundamental backdrop makes it prudent to wait for strong follow-through buying before positioning for any further appreciating move for the GBP/JPY cross.

Economic Indicator

BoE Interest Rate Decision

The Bank of England (BoE) announces its interest rate decision at the end of its eight scheduled meetings per year. If the BoE is hawkish about the inflationary outlook of the economy and raises interest rates it is usually bullish for the Pound Sterling (GBP). Likewise, if the BoE adopts a dovish view on the UK economy and keeps interest rates unchanged, or cuts them, it is seen as bearish for GBP.

AUD/USD extends decline to fresh monthly lows below 0.7100

AUD/USD trades south of 0.7100 early in the Asian session on Thursday, as the US Dollar soared following the Federal Reserve's monetary policy announcement. The Fed delivered a 25 bps rate hike as expected, while policymakers expressed concerns about inflation leading to bets of additional hikes before year-end.

USD/JPY flirts with 156.00 after Fed's hawkish hike

USD/JPY trades at fresh weekly highs around 156.00 early on Thursday, as the US Dollar soared following the Federal Reserve's monetary policy announcement. The US central bank hiked the benchmark rate by 25 bps as expected, while Chair Kevin Warsh delivered quite hawkish comments in the press conference that followed the decision.

Gold dips towards $4,250 in the Fed's aftermath

Gold erased intraday gains and turned negative following the Federal Reserve's decision to hike rates by 25 bps as expected. The XAU/USD pair briefly surpassed the $4,360 level, now accelerating its slide towards the $4,250 price zone. Hawkish words from Chair Kevin Warsh fueled bets for additional hikes before year-end.

Fed raises 2026 interest rate forecast to 4.1%, lifts PCE inflation projections

The Federal Reserve's (Fed) latest dot plot projections, released by the Federal Open Market Committee (FOMC) on Wednesday, show policymakers now expect interest rates to stand at 4.1% by the end of 2026, up from 3.8% in June.

Fed recap: One hike down, more to come? The Fed’s new rate path says yes

The Federal Reserve (Fed) raised its Fed Fund Target Range (FFTR) range by 25 basis points to 3.75%-4.00% in a unanimous decision, saying the move would support a timelier return to its 2% inflation goal.

How Japan became the World's Banker and why that era may be ending

Japan's ultra-low interest rates helped finance trillions of dollars in global investments for more than a decade, making the Japanese Yen one of the world’s cheapest sources of funding. With the Bank of Japan expected to tighten policy again this week, that advantage may be entering a new phase. While most major economies raised interest rates, Japan remained the world's outlier.