Ella 
GBP/JPY was trading around 184.50 during the European session on Tuesday, rebounding from 180.10, the lowest level since January recorded on Monday. However, GBP/JPY faces challenges as the Japanese yen (JPY) strengthens on growing expectations that the Bank of Japan (BoJ) may further tighten monetary policy.
Japan’s Chief Cabinet Secretary Yoshimasa Hayashi said on Tuesday that “wage growth is expected to expand to part-time workers and small businesses by autumn, supported by strong shunto results and a minimum wage hike.”
Japan’s labor cash income increased by 4.5% year-on-year in June, exceeding the previous value of 2.0% and the expected 2.3%. This was the highest increase since January 1997, cementing Japan’s transition to a rising interest rate environment.
Sterling (GBP) weakened as subdued market sentiment eroded the appeal of risk-sensitive assets. Rising tensions in the Middle East and worries about a slowdown in the US economy have boosted the appeal of safe-haven assets such as the Japanese yen, thus weakening the GBP/JPY cross.
Additionally, the pound faces the challenge of a 25 basis point interest rate cut by the Bank of England (BOE) at its August meeting last week.
UK BRC retail sales increased by 0.3% year-on-year in July, reversing a 0.5% decline in June and in line with market forecasts. Traders are awaiting July’s S&P Global/CIPS Construction Purchasing Managers’ Index, which measures business activity in the UK construction sector.
