GBP/JPY slides on softer UK labour market conditions, hawkish BoJ comments

• GBP/JPY falls after weak UK employment figures pressure the Pound Sterling.
• The Pound suffers from expectations that the Bank of England (BoE) may be forced to cut rates after the disappointing jobs data.
• The UK unemployment rate rises to 4.6%, accompanied by an increase in jobless claims.

The Japanese Yen (JPY) is strengthening against the British Pound (GBP) on Tuesday, following the release of employment data that suggests the UK economy may be under pressure.

After retesting the 196.00 psychological level prior to the release of the UK employment data, GBP/JPY is erasing its recent gains. At the time of writing, the pair is trading near 195.29, a level that aligns with the 78.6% Fibonacci Retracement level of the January-April decline.

UK employment data reveals labour market weakness

The United Kingdom's (UK) Office for National Statistics (ONS) released a labor market report on Tuesday that indicated a softening in labor conditions. The ILO unemployment rate increased to 4.6% in the three months leading up to April, up from 4.5% reported in the first quarter. 

While this figure aligned with expectations, it suggests that the labor market is losing some momentum.

The Claimant Count Change showed that the number of people claiming jobless benefits increased by 33,100 in May. The data reversed the previous month's revised decline of 21,200 and missed forecasts for a smaller rise of 9,500. 

Meanwhile, the employment change figure showed a gain of 89,000 jobs in the three months to April, a slowdown from March's increase of 112,000, further suggesting that job growth is cooling as economic activity moderates.

The Employment data signaled a gradual softening in the UK labour market, which could influence the Bank of England's (BoE) outlook on interest rates. Signs of a softer labor market could add pressure to BoE officials to cut rates.

For the GBP/JPY pair, expectations that the BoE may reduce interest rates while the BoJ looks to increase rates could drive prices lower in the near term.

On Tuesday, BoJ Governor Kazuo Ueda said that Japan's inflation still has some way to go to reach the 2% target. "We will raise interest rates if we have enough confidence that underlying inflation nears 2% or moves around 2%," Ueda said.

Market participants interpreted these remarks as reducing the likelihood of an imminent interest-rate hike.