The yen bounced back, while the pound resumed its fall despite a positive employment report during Wednesday European session. EUR/USD continued to be flat due to an absence of major data or risk events for the world two largest economies the Eurozone and the United States.

USD/JPY dropped back below 103 to 102.70 as doubts emerged concerning the validity of a report published in Japan major business newspaper about the Bank of Japan pursuing negative rates as its main policy instrument in coming months. The Bank of Japan was seen as having exhausted its policy options and any additional stimulus would probably be limited in scope. Further reduction in policy rates would damage Japanese banks profitability and potentially cause a backlash from the public and Japanese savers. EUR/JPY also dropped back below 116 to 115.30. The market will learn more about the Bank of Japan views following its next meeting on September 20-21st.

UK employment numbers were roughly in line with expectations, as the average unemployment rate for the three months to July was steady at 4.9% and the claimant count was up by 2.4 thousand during August. Wage growth decelerated during the month to 2.3% compared to an upwardly revised 2.5% the previous month, but that was much better than analysts expectation of a slowdown to 2.1%. The report reaffirmed that the immediate economic impact of Brexit appeared to be minor, although there are warnings that in the medium-term, certain key sectors might see reduced hiring.

The data did not have much of an impact on sterling at the time of the release, although the UK currency fell later in the day. GBP/USD fell to around 1.3150, while EUR/GBP extended its gains to 0.8541. Thursday will be a key day for the pound as the Bank of England?s Monetary Policy Committee meets and retail sales for August will also be released.

In other data, Industrial Production in the Eurozone during July missed expectations on its month to month change by contracting 1.1% instead of -0.9% expected. However, the year on year contraction was less than feared at -0.5%. The data had little impact on the euro.

Oil plunged to an 8 day low around $44 a barrel US contract. EIA inventory numbers showed a surprise draw in weekly crude oil stocks, which was only partially balanced by a bigger than expected build in distillate stocks. Crude oil rebounded following the numbers to around $45 a barrel in volatile trading.

Looking ahead, the market will focus on New Zealand GDP numbers and the Australian employment report coming out during Thursday Asian session.