GBP/JPY aims to recapture 166.00, spotlight is on UK employment data

• GBP/JPY is gradually advancing towards 166.00 as the focus shifts to UK employment numbers.
• UK households have sensed a sigh of relief after a cap on energy bills.
• Japan is communicating with other countries to discuss biased one-sided moves in yen.

The GBP/JPY pair is gradually moving higher after sensing support from the critical figure of 165.00. The asset is aiming to recapture the critical hurdle of 166.00 as the impact of an upbeat Japan’s Gross Domestic Product (GDP) data has started fading away. Apart from that, investors will focus on the UK employment data, which is due next week.

On Thursday, Japan’s GDP data improved meaningfully to 3.5% against the expectations and the prior print of 2.9% and 2.2% respectively on an annual basis. Also, the quarterly data was recorded higher at 0.9% against the forecasts of 0.7% and the prior release of 0.5%. Apart from that, Japan’s officials are worried over one-sided downside moves in the Japanese yen.

Japan's top currency diplomat Kanda said on Thursday that recent yen falls cannot be justified based on fundamentals, as reported by Reuters. He further added that the Bank of Japan (BOJ) is expected to take necessary action to support the yen bulls. Also, Tokyo is communicating with other countries on recent Fx moves.

On the UK front, the appointment of a new UK Prime Minister has strengthened the pound bulls. Liz Truss’s attempts of cornering the accelerating energy prices and improving the employment generation process are returning consumer confidence. The novel cabinet has fixed a cap on energy bills, according to which, a typical household will pay no more than £2,500 a year on energy bills. This will definitely scale down the headwinds for households. Also, it will safeguard them against bumper demand for energy in the upcoming winter season.

Going forward, investors will focus on the UK employment data, which will release next week. The major focus will be on the labor cost index as the pound zone has remained unable in hiking paychecks for the households.