• GBP/JPY edges higher after wage data fails to meet expectations, undermining the Yen. 
• Sterling maintains its steady march after the BoE’s chief economist urges caution in cutting interest rates. 

GBP/JPY climbs back into positive territory just above 194.00 on Tuesday, as the Pound Sterling (GBP) makes a mild recovery against the Japanese Yen (JPY) which depreciates after the release of lower-than-expected Japanese wage data for August. 

Japanese Labor Cash Earnings rose 3.0% in August on a year-over-year basis, which is lower than the 3.1% estimated by economists, and the 3.4% in July (revised down from 3.6%), according to data from the Ministry of Economy, Trade and Industry of Japan. 

The lower-than-estimated rise in wages is mildly disinflationary and therefore likely to curb the chances of the Bank of Japan (BoJ) deciding to raise interest rates from their comparatively low 0.25% level. Interest rates remaining lower for longer will result in less foreign capital inflows to Japan, a reduction in demand for the Yen and a weaker currency. This, in turn, leads GBP/JPY to edge higher.

The Pound, meanwhile, regains its feet after the Chief Economist at the Bank of England (BoE) Huw Pill, said any future rate cuts by the bank should be made cautiously. This, in turn, helps GBP/JPY retain the upside. Prior to that Sterling had been selling off after his colleague, the Governor of the BoE Andrew Bailey, said the bank should become more “activist” in cutting interest rates, thereby suggesting more frequent or larger cuts might be on the horizon.