British Pound drops against Yen after UK employment data release

• The British Pound falls to near 215.95 against the Japanese Yen after the UK employment data for for three months ending in June.
• The UK ILO Unemployment Rate remains steady at 4.9%. Average Earnings Excluding Bonuses grew at a faster pace of 3.5% YoY.
• Investors await the UK CPI data for July, which will be released on Wednesday.

The British Pound (GBP) faces selling pressure against the Japanese Yen (JPY) after the release of the United Kingdom (UK) labor market data for three months ending in June, dropping to near 215.95.

The Office for National Statistics (ONS) has reported that the economy created 83K fresh jobs, lower than 147K in the quarter ending May. The ILO Unemployment Rate remains steady at 4.9%, while it was expected to arrive lower at 4.8%.

Average Earnings Excluding Bonuses, a key measure of wage growth, rose at a faster pace of 3.5% YoY vs. estimates and the prior release of 3.4%. The wage growth measure including Bonuses grew in line with 4.1% projections, slower than the previous reading of 4.4%, revised higher from 4.3%.

Meanwhile, investors brace for more volatility in the British Pound this week as the UK Consumer Price Index (CPI) data is scheduled to be published on Wednesday. The data is expected to show that headline inflation accelerated to 2.9% Year-on-Year (YoY) from 2.6% in June.

While the core CPI – which excludes volatile components of food, energy, alcohol and tobacco – is seen growing at a modest pace of 2.5% against the previous reading of 2.6%.

The inflation data will likely have a significant impact on the Bank of England’s (BoE) monetary policy expectations.

Currently, the BoE is expected to hold interest rates steady the entire year.

BoE seen on hold through year-end as UK growth momentum fades

Strategists at Rabobank underline a steady policy outlook, noting that “it is RaboResearch’s view that the BoE will likely keep interest rates on hold through to the end of the year.”

On the Tokyo front, the Japanese currency broadly underperforms even as financial markets are confident about a Bank of Japan (BoJ) interest rate hike in September.

Analysts at MUFG highlight that market expectations for further BoJ tightening remain robust, with “the pricing for a 25bp hike at the next meeting in September remains elevated, implying around an 80% probability of a hike.”