GBP/JPY advances to near 166.70 as UK Unemployment Rate declines to 3.6%

• GBP/JPY has overstepped the critical hurdle of 166.70 on lower-than-expected UK jobless data.
• The Claimant Count change has surprisingly increased by 6.3k vs. a decline of 9.2k expected.
• UK households are delighted as Average Hourly Earnings have significantly improved to 5.2%.

The GBP/JPY pair has witnessed a firmer rebound after the release of the UK employment data. The jobless rate has declined firmly to 3.6% against the expectations and the prior release of 3.8%. While the Average Hourly Earnings data has improved significantly to 5.2% vs. the expectations of 5.0% and the former figure of 4.7%.

The Claimant Count change has surprisingly increased by 6.3k, while the market participants were expecting a decline of 9.2k.

After in-depth scrutiny of the employment data by the market participants, pound bulls will start dancing to the tunes of the UK Consumer Price Index (CPI), which will release on Wednesday. The double-digit inflation rate is already torturing the households due to higher payouts and even a mild advancement in the price pressure will add fuel to the fire.

Investors should be aware of the fact that the inflation rate is seen at 10.2% while the core CPI data is expected to land at 6.3%, higher than the prior release of 6.2%.

On the Tokyo front, a shift in the stance of the Bank of Japan (BOJ) is highly required to corner the depreciating yen. The Japanese yen is falling like a house of cards and is hurting the importers in the economy. Costly imports are resulting in higher input costs for the corporate. As the overall demand in the economy is extremely weak, the firms are unable to pass on the impact. This may result in a meaningful decline in operating margins.

Going forward, Japan’s Industrial Production data will be of utmost importance. The economic data is seen as stable at -1.8%.