GBP/JPY scales 8 1/2-year peak on UK pay growth data as Japan GDP now eyed

The GBP/JPY currency pair scaled a fresh 8 1/2-year peak on Tuesday, after data showed UK wage growth outpaced market estimates in the three months to December.

Additionally, UK’s unemployment rate decreased to levels unseen since early 2023.

Average weekly earnings, including bonuses, rose 5.8% year-on-year to GBP 669 per week in the three months to December. It has been the slowest wage growth in 17 months, the Office for National Statistics said.

Still, wages rose at a stronger-than-expected pace.

Average earnings grew at a slower rate in both the public sector (5.8% year-on-year versus 6.7% year-on-year in November) and the private sector (5.9% YoY versus 6.7% YoY in November).

Regular pay, excluding bonuses, rose 6.2% year-on-year to GBP 626 per week in the three months to December, slowing from a 6.7% rise in the preceding period, but exceeding market expectations of 6% growth. Regular pay grew at the slowest rate in 14 months.

Wage growth is closely watched by the Bank of England, as the latter seeks to determine how much inflation pressure remains in the economy and if it can begin considering interest rate cuts.

Meanwhile, UK’s adjusted experimental unemployment rate was reported at 3.8% in the three months leading up to December, down from 3.9% in the period between September and November.

In other macro data, Yen traders are now expecting the preliminary report on Japan’s GDP growth for the fourth quarter, due out on Wednesday.

Japan’s economy probably expanded at an annualized rate of 1.4% in Q4, according to market consensus.

As of 9:16 GMT on Tuesday GBP/JPY was edging up 0.36% to trade at 189.214. Earlier in the session, the minor Forex pair went up as high as 189.335. The latter has been the pair’s strongest level since August 25th 2015 (189.992).