GBP/JPY tumbles to near 207.00 as Yen gains on strong business confidence

• GBP/JPY slumps to near 207.00, following the upbeat Japan’s Tankan survey Q4 data.
• Tankan Q4 Large Manufacturing Index rises to 15, the highest level seen in four years.
• The BoJ is expected to raise interest rates by 25 bps to 0.75% this week, while the BoE might reduce them at similar pace to 3.75%.

The GBP/JPY pair is down 0.5% around 207.30 during the European trading session. The pair faces intense selling pressure as the Japanese Yen (JPY) outperforms across the board, following the release of the Japan’s Tankan Q4 business sentiment data.

The data showed that the headline index measuring big manufacturers' business confidence rose to 15 quarter ending December, the highest figure seen in four years. In the previous quarter, BOJ's "tankan" survey showed up at 14.

Upbeat Japan’s manufacturing business sentiment data has reinforced expectations of an interest rate hike by the Bank of Japan (BoJ) in the monetary policy announcement on Friday.

The BoJ is expected to raise interest rates by 25 basis points (bps) to 0.75% Governor Kazuo Ueda stated recently that central bank is getting closer to achieve its inflation target.

Meanwhile, the Pound Sterling (GBP) trades broadly calm ahead of the United Kingdom (UK) labour market data for three-months ending October. The data is expected to show that the Unemployment Rate rose to 5.1%, and Average Earnings excluding bonuses grew moderately by 4.5%. Signs of rising jobless rate and slowing wage growth would boost expectations of an interest rate cut by the BoE in its monetary policy meeting on Thursday.

The BoE is already anticipated to cut interest rates by 25 bps to 3.75% amid weak labor demand and easing inflationary pressures.