GBP/JPY consolidates near two-week high, above 203.00 ahead of UK jobs data

GBP/JPY stalls a one-week-old uptrend as bulls turn cautious ahead of UK jobs data.
The BoJ rate hike uncertainty continues to undermine the JPY and supports the cross.
Dovish BoE expectations and the UK’s fiscal concerns act as a headwind for spot prices.

Haresh Menghani FXStreet

The GBP/JPY cross enters a bullish consolidation phase and holds steady above the 203.00 round figure, near a two-week peak, touched during the Asian session on Tuesday. Traders now seem reluctant and opt to wait for the release of the UK employment details before positioning for an extension of the recent bounce from the 199.00 neighborhood, or a one-month low touched last week.

The crucial UK jobs report could make it easier to justify a Bank of England (BoE) rate cut next month as the Unemployment Rate in the three months to September is expected to creep higher to 4.9%, which would be the highest level since 2021. Any further signs of a slack in the UK labour market would back the case for more easing by the BoE on the back of softer inflation. This, along with concerns about the UK's fiscal situation, holds back traders from placing aggressive bullish bets around the British Pound (GBP) and caps the GBP/JPY cross.

The Japanese Yen (JPY), on the other hand, continues with its relative underperformance amid the Bank of Japan (BoJ) rate hike uncertainty. In fact, a summary of BoJ policymakers' opinions at their October meeting released on Monday reflected that there was some uncertainty over the effect of new Prime Minister Sanae Takaichi’s policies on the economy and prices. Moreover, board members suggested the fallout from higher US tariffs and Japanese companies' wage momentum as key factors in deciding the timing of the next interest rate hike.

Adding to this, BoJ’s Junko Nakagawa said on Monday that the central bank will proceed cautiously with policy decisions. This, along with the upbeat market mood, is seen undermining the JPY's safe-haven status and offering some support to the GBP/JPY cross. However, expectations that Japanese authorities might intervene to stem further weakness in the domestic currency act as a headwind for the currency pair ahead of the UK macro data. Hence, it will be prudent to wait for strong follow-through buying before positioning for any further gains.

Economic Indicator

ILO Unemployment Rate (3M)

The ILO Unemployment Rate released by the UK Office for National Statistics is the number of unemployed workers divided by the total civilian labor force. It is a leading indicator for the UK Economy. If the rate goes up, it indicates a lack of expansion within the UK labor market. As a result, a rise leads to a weakening of the UK economy. Generally, a decrease of the figure is seen as bullish for the Pound Sterling (GBP), while an increase is seen as bearish.

Why it matters to traders?

The Unemployment Rate is the broadest indicator of Britain’s labor market. The figure is highlighted by the broad media, beyond the financial sector, giving the publication a more significant impact despite its late publication. It is released around six weeks after the month ends. While the Bank of England is tasked with maintaining price stability, there is a substantial inverse correlation between unemployment and inflation. A higher than expected figure tends to be GBP-bearish.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.