Ella 
During Tuesday’s Asian session, the GBP/JPY cross was unable to continue its strong intraday trend, bouncing more than 150 pips from the previous day’s one-week low of 181.15, and was stuck in a tight range. GBP/JPY is currently trading just above the 182.00 level, with the market now looking for a boost from the UK’s wage growth data.
The UK’s three-month average wage growth excluding bonuses is expected to have reached an annual rate of 7.8% in August, the same as last month’s data. At the same time, the three-month average wage rate including bonuses in the UK is expected to fall to an annual rate of 8.3% in August from 8.5% previously. If the data comes in stronger than expected, it could raise concerns about inflationary pressures and reignite bets for further policy tightening by the Bank of England (BOE), which would boost the GBP and GBP/JPY crosses.
Conversely, if the UK releases weaker data, the Bank of England will reiterate its expectation that it will hold policy steady in November, but the immediate market reaction may be more muted. The Bank of Japan maintains its view that inflation is transitory and has no intention of withdrawing its massive monetary stimulus. A dovish central bank outlook and generally positive market risk appetite should continue to weigh on the safe-haven Yen, suggesting that the path of least resistance in the GBP/JPY cross remains to the upside.
However, speculation that the Japanese authorities will intervene in the currency markets to support the currency may discourage traders from placing aggressive bullish bets. Traders may also choose to take a wait-and-see approach ahead of Wednesday’s UK consumer inflation data, which will have a significant impact on expectations for the Bank of England’s next policy move. However, the aforementioned fundamental backdrop supports the obvious bullish trend of the GBP/JPY cross.
