BoE Rate Cut Bets Weaken as UK Labor Market Holds Firm; GBP/JPY Eyes 193

Economic

Summary:

The British pound extends its advance against the Japanese yen, nearing 189.00 following unexpectedly strong UK labor market data.

BUY GBPJPY

Close Time

CLOSED

189.300

Entry Price

193.000

186.500

207.624 -0.699 -0.34%

78.2

Pips

Profit

186.500

190.082

Exit Price

189.300

Entry Price

193.000

The British pound rallied against the Japanese yen during Tuesday’s European session, with the GBP/JPY pair climbing toward the psychologically significant 189.00 handle. The upward move was fueled by a surprisingly robust batch of UK employment data for the three months ending in February, which reignited optimism around the country’s economic resilience despite lingering structural headwinds and a fragile global economic backdrop.

According to the Office for National Statistics (ONS), UK employers added 206,000 jobs in the three-month period to February, a notable acceleration compared to the 144,000 gain recorded during the previous quarter. This unexpected surge in job creation, coupled with a steady unemployment rate of 4.4%, suggests that Britain’s labor market remains more resilient than many had anticipated—especially amid elevated borrowing costs and stagnant productivity growth.

Wage growth remained relatively firm as well. Average earnings excluding bonuses—a key indicator of underlying wage inflation—rose by 5.9% year-on-year. Although this figure fell short of the market’s 6.0% consensus forecast, it marked an uptick from the previous reading of 5.8%, indicating that wage pressures are proving stickier than many central bankers might prefer. For the Bank of England (BoE), this presents a dilemma. On one hand, robust job and wage growth ostensibly justify holding off on monetary easing. On the other, wage inflation appears to be gradually decelerating, suggesting that inflationary momentum is softening.

Financial markets are now grappling with whether the BoE will pivot to rate cuts later this year or maintain its cautious stance. While today’s labor market numbers theoretically delay any urgency for policy loosening, forward-looking concerns about the UK economy’s structural health continue to cast a long shadow. Of particular note is the recent hike in employer National Insurance contributions, which came into effect this month following the policy announcement by Chancellor of the Exchequer Rachel Reeves in her Autumn Budget. The increase—from 13.8% to 15%—effectively raises the cost of hiring, especially for businesses in labor-intensive sectors. Analysts warn that this could dampen future job growth, undermining what currently appears to be a relatively strong labor market.

Beyond domestic issues, GBP/JPY remains sensitive to geopolitical risks and cross-border economic frictions, particularly those emanating from Asia. In a concerning development for global markets, the trade relationship between the United States and China continues to deteriorate. The reintensification of tariff threats between the world’s two largest economies is reviving fears of supply chain disruption and reduced global trade flows. For investors, this carries real implications. If the US-China tariff war escalates further, risk appetite could quickly sour, leading to increased demand for safe-haven currencies such as the Japanese yen—even if fundamentals do not fully support such a move.

Japan, too, is navigating its own trade challenges. Japanese Economic Minister Ryosei Akazawa is preparing to travel to Washington for key trade discussions aimed at reducing American-imposed tariffs on Japanese exports. In comments made prior to his departure, Akazawa stated unequivocally that Japan’s goal is the “complete removal” of additional US tariffs. He emphasized that the lingering Trump-era trade barriers are “eating away at Japanese firms’ profits day by day,” underscoring the urgency of securing concessions. While the outcome of these talks remains uncertain, any breakthrough could support the yen in the near term, particularly if markets perceive reduced trade-related risk.

Technical Analysis

GBP/JPY’s technical posture is signaling further upside potential. The one-hour chart reveals an inverse head-and-shoulders formation, which traditionally serves as a bullish reversal pattern. The pattern’s neckline was recently breached near 189.20, and the breakout was accompanied by a clean bullish candle and rising volume—both of which enhance the credibility of the move. The right shoulder of the formation also aligned neatly with an ascending trendline support, adding further technical confluence. In addition, the pair has managed to stay above its 200-period exponential moving average on the hourly timeframe, another indication that momentum may favor bulls in the short term.

The Relative Strength Index (RSI) on the same timeframe has started to climb, suggesting that bullish momentum is beginning to build. If the pattern continues to unfold as expected, the projected upside target sits near 193.00 a level that aligns with both the upper boundary of the current ascending price channel and previous structural resistance.

TRADE RECOMMENDATION

BUY GBPJPY

ENTRY PRICE: 189.30

STOP LOSS: 186.50

TAKE PROFIT: 193.00

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