GBP/JPY attracts some sellers near 188.00 as BoJ official signals more rate hikes

• GBP/JPY weakens around 188.15 in Thursday’s early European session, down 0.45% on the day. 
• The BoJ official leaves the door open for further interest-rate hikes, lifting the Japanese Yen.
• The upbeat UK Services PMI might help limit GBP’s losses. 

The GBP/JPY cross trades in negative territory for the third consecutive day near 188.15 during the early European session on Thursday. The Japanese Yen (JPY) strengthens as Japan’s rising real wages report reinforces market expectations for further hikes in borrowing costs.

Data released by the Ministry of Health, Labor and Welfare showed on Thursday that Japan’s Labor Cash Earnings climbed by 3.6% YoY in July, compared with a rise of 4.5% in June, beating the estimation of 3.1%. This upbeat reading has prompted speculation that the Bank of Japan (BoJ) would implement another interest rate hike before the end of 2024.

The BoJ board member Hajime Takata said on Thursday, “If the economy and prices move in line with our forecast, we will adjust policy rates in several stages.” Takata further stated that the Japanese economy recovered moderately, although some weak signs were seen. 

On the other hand, interest rate cut expectations by the Bank of England (BoE) weigh on the Pound Sterling (GBP) against the JPY. According to money market pricing data, the BoE is expected to cut interest rates once more this year, leaving borrowing costs at 4.75%. However, the publication of the UK’s latest services PMI might support the GBP and cap the downside for the cross. S&P Global showed that the UK Services PMI for August accelerated at its fastest pace since April.