GBP/JPY rises on BoJ caution and mixed UK employment data

• GBP/JPY up: Ueda's cautious BoJ view weakens yen.
• UK employment disappoints, with rising unemployment and falling wages hurting the Pound, while speculation about a rate cut by the BoE increases.
• BoE's Andrew Bailey: Central banks need to assess how restrictive rates should be.

The GBP/JPY pair posted modest gains of 0.29% in the mid-North American session, after Bank of Japan (BoJ) Governor Kazuo Ueda's speech weakened the Japanese yen due to his cautious comments. Despite this, sterling was held back by a softer-than-expected British jobs report. The pair trades at 168.72 after reaching a daily low of 187.97.

BoJ Governor Ueda's statements and UK employment data weighed on the Yen

During the Asian session, BoJ Governor Kazuo Ueda said the economy is recovering modestly and is still showing signs of weakness following the release of weak data. Ueda acknowledged that consumption of food and basic necessities is weakening as prices rise. He added that household spending is improving moderately and higher wages are expected.

BoJ Governor Ueda did not offer any forward-looking guidance on the end of negative rates. According to Bloomberg, some sources claimed that the BoJ is considering raising borrowing costs in March, although the outcome of the decision is still too close between the March and April meetings.

Lately, Bank of England Governor Andrew Bailey has made headlines by saying that major central banks need to question how restrictive their policy is and how long it should be maintained. Bailey added that policy is doing its job and noted that inflation expectations are well anchored.

In terms of data, the latest UK employment data showed an increase in the unemployment rate, from 3.6% to 3.9% year-on-year, with 21,000 jobs lost. Wage growth fell from 6.2% to 6.1% in the final quarter of 2023, according to the Office for National Statistics (ONS). Following the data, markets increased bets on a BoE rate cut in June, although the first fully discounted rate cut is expected in August.

GBP/JPY Price Analysis: Technical Outlook

The daily chart shows the pair with a neutral to bullish bias, and if buyers achieve a daily close above the March 11 open at 189.14, that could open the door to further upside. In that case, the next resistance level would be the Tenkan Sen, at 189.57, followed by the psychological level of 190.00. On the opposite side, the first support would be the 50-day moving average (DMA) at 187.84, followed by the February 8 low at 186.86.