GBP/JPY advances firmly above 162.00 as bets over BOE-BOJ policy divergence accelerate

• GBP/JPY has climbed above 162.00 firmly as odds of further BOE-BOJ policy divergence advance.
• Higher UK labor cost data will delight the BOE policymakers.
• The BOJ may adopt a neutral stance as the inflation rate sustains above 2%.

The GBP/JPY pair has crossed the critical hurdle of 162.00 vigorously as investors are expecting further escalation in Bank of England (BOE)-Bank of Japan (BOJ) policy divergence. The cross is expected to extend its gains after establishment above the crucial resistance of 162.00.

A decent improvement in Average Earnings in the UK zone has strengthened the BOE policymakers to elevate interest rates unhesitatingly. The labor cost data landed at 4.7%, higher than the expectations of 4.5% and the prior release of 4.4%.

Earlier, the BOE policymakers were worried over sluggish paychecks to the households. The inflation rate is accelerating in the UK zone dramatically and in order to pay off the higher payouts, improvement in the wage rate was vulnerable. Therefore, the BOE policymakers were not deploying the tightening quantitative measures with full independence. Now, the meaningful improvement in the labor cost index will delight BOE Governor Andrew Bailey while drafting the monetary policy.

The UK Claimant Count Change was trimmed to 10.5k, lower than the expectations of 32k and the prior release of 26.8k. The Unemployment Rate remained unchanged at 3.8%.

On the Tokyo front, the yen bulls failed to display a buying action despite an improvement in the National Consumer Price Index (CPI). The economic data landed at 2.6%, higher than the consensus of 2.2% and the prior release of 2.4%. Sustainability of the inflation rate above 2% may force the Bank of Japan (BOJ) to turn neutral ahead, however, the escalation in the policy divergence is imminent.