Ella 
GBP/JPY remained under selling pressure around 196.65 in early European trading on Thursday. The onset of risk aversion led to more safe-haven flows in the broader markets, including the Japanese yen (JPY).
S&P 500 futures fell 0.10% ahead of the European session, while the Nikkei index closed down more than 3%, hitting its lowest level since late April. The risk-averse environment supported safe-haven currencies such as the yen and dragged GBP/JPY lower to its lowest level since May 16.
In addition, growing speculation that the Bank of Japan will raise interest rates again at its monetary policy meeting next week forced short positions to close, thereby lifting the yen against its counterparts.
On the other hand, a Reuters poll showed that most economists expect the Bank of England to cut the bank rate to 5% at its August meeting next week. This, in turn, has put some selling pressure on the British pound (GBP). Traders currently see a nearly 45% chance that the Bank of England will cut its policy rate to 5.0% next week.
Data released on Wednesday showed that business activity in the UK expanded in July. The initial value of the UK S&P Global Composite Purchasing Managers’ Index (PMI) was better than market expectations, rising from 52.3 in June to 52.7 in July. At the same time, the manufacturing purchasing managers’ index in July climbed from 50.9 in the previous month to 51.8, the highest level in two years. The service sector purchasing managers’ index rose from 51.2 to 52.4 during the same period, lower than the market consensus of 52.5.
