The GBP/JPY currency pair experienced fresh selling pressure during the Asian session on Friday, falling below the 188.00 level to reach a three-and-a-half-week low. This decline marks the third negative move in the past four days and is driven by continued strength in the Japanese Yen (JPY), buoyed by expectations of a more hawkish stance from the Bank of Japan (BoJ).
BoJ Governor Kazuo Ueda reaffirmed earlier this week that the central bank is prepared to raise interest rates further if economic conditions and price levels meet expectations. BoJ Board Member Hajime Takata added on Thursday that additional adjustments to monetary policy may be necessary if firms continue to increase capital expenditure, wages, and prices. Data released on Thursday indicated that real wages in Japan unexpectedly rose for the second consecutive month in July, reinforcing the potential for another rate hike in 2024.
In contrast, mixed employment data from the United States this week has raised concerns about the US economy’s health. Combined with ongoing geopolitical tensions, this has dampened investor appetite for riskier assets, supporting the safe-haven JPY and placing additional downward pressure on the GBP/JPY cross. The British Pound (GBP) has seen limited buying interest in this environment.
The recent decline has seen the GBP/JPY break below the 189.00 horizontal support and slide beneath the 188.00 mark, favoring bearish traders. Technical indicators on the daily chart remain in negative territory, although they have not yet reached oversold levels. This suggests that the path of least resistance for the GBP/JPY pair remains to the downside, supporting the likelihood of further losses.
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