The GBP/JPY pair fell by 0.5% near the 207.30 level during the European trading session. The pair faces intense selling pressure as the Japanese Yen (JPY) outperforms across the board, following the release of Japan’s Q4 Tankan business sentiment data.
The data showed that the main index measuring business confidence of major manufacturers rose to the 15th quarter ending in December, the highest number in four years. In the previous quarter, the Tankan survey conducted by the Bank of Japan showed it at 14.
Upbeat industrial business sentiment data in Japan boosted expectations of a rate hike by the Bank of Japan (BoJ) in its monetary policy announcement on Friday.
The Bank of Japan is expected to raise interest rates by 25 basis points to 0.75%, and Governor Kazuo Ueda recently said that the central bank is close to meeting its inflation target.
Meanwhile, the British pound is trading broadly calm ahead of UK labor market data for the three months ending in October. The data is expected to show that the unemployment rate rose to 5.1%, and average income excluding bonuses rose moderately by 4.5%. Signs of rising unemployment and slowing wage growth should reinforce expectations of a rate cut by the Bank of England at its monetary policy meeting on Thursday.
The Bank of England is already expected to cut interest rates by 25 basis points to 3.75% amid weak labor demand and easing inflationary pressures.
