GBP/JPY rebounds from over one-week low, back above 207.00 after UK jobs data

• GBP/JPY attracts sellers for the fourth straight day, though the downside remains cushioned.
• The mixed UK employment details offer support to the GBP and act as a tailwind for the cross.
• The divergent BoE-BoJ policy expectations warrant caution before positioning for any recovery.

The GBB/JPY cross prolongs its recent pullback from the 209.00 neighborhood or the highest level since August 2008, touched last week, and drifts lower for the fourth straight day on Tuesday. Spot prices, however, managed to rebound a few pips from a one-and-a-half-week low following the release of the UK jobs data and traded above the 207.00 mark during the early European session.

The UK Office for National Statistics (ONS) reported that the ILO Unemployment Rate edged higher to 5.1% in the three months to October from 5% in the quarter to September. The reading was in line with consensus estimates. Meanwhile, the number of people claiming jobless benefits climbed 20.1K in November compared to 22.3K expected. Adding to this, a downward revision of the previous month's Claimant Count Change, to -3.9K against 29.0K reported previously, offers some support to the British Pound (GBP) and the GBP/JPY cross.

However, the growing acceptance that the Bank of England (BoE) will lower borrowing costs at its policy meeting on Thursday holds back the GBP bulls from placing aggressive bets. The Japanese Yen (JPY), on the other hand, continues to be underpinned by firming expectations for an imminent interest rate hike by the Bank of Japan (BoJ) later this week. Apart from this, a softer risk tone further benefits the JPY's relative safe-haven status and contributes to capping the GBP/JPY cross, warranting some caution before positioning for a further recovery.

Traders now look forward to the release of the flash UK PMIs for some impetus. The focus, however, will remain glued to the key central bank event risks – the BoE rate decision on Thursday and the outcome of a two-day BoJ policy meeting on Friday. The latter should play a key role in driving the near-term JPY price dynamics and determining the next leg of a directional move for the GBP/JPY cross.