GBP/JPY holds position around 184.50 after paring gains

• GBP/JPY rebounds from its lowest level of 180.10 since January, recorded on Monday.
• Japan’s Labor Cash Earnings rose by 4.5% YoY in June, the highest increase since January 1997.
• The Pound Sterling received pressure as sluggish market sentiment has dampened the appeal of risk-sensitive currencies.

GBP/JPY trades around 184.50 during the European hours on Tuesday, rebounding from its lowest level of 180.10 since January, recorded on Monday. However, The GBP/JPY cross faced challenges as the Japanese Yen (JPY) strengthened due to growing expectations that the Bank of Japan (BoJ) may implement further monetary policy tightening.

Japan’s Chief Cabinet Secretary Yoshimasa Hayashi stated on Tuesday that “wage increases are expected to extend to part-timers and small businesses by autumn, supported by strong Shunto results and minimum wage hikes.” Hayashi did not provide comments on foreign exchange levels.

Japan’s Labor Cash Earnings came in at 4.5% year-on-year increase in average income for June, exceeding both the previous 2.0% and the expected 2.3% readings. This is the highest increase since January 1997, reinforcing Japan's transition toward a rising interest rate environment.

The Pound Sterling (GBP) exhibited a weak performance as dismal market sentiment has dampened the appeal of risk-sensitive assets. Growing Middle East tensions and fears of an economic slowdown in the United States (US) have improved the appeal of safe-haven assets, such as the Japanese Yen, undermining the GBP/JPY cross

Additionally, the British Pound faced challenges as the Bank of England (BoE) delivered a broadly expected 25-basis point rate cut at its August meeting held last week.

BRC Like-For-Like Retail Sales in the United Kingdom rose 0.3% year-on-year in July, reversing from a 0.5% fall in June and matching market forecasts. Traders await S&P Global/CIPS Construction PMI for July, gauging business activity in the UK’s construction sector.