- USD/JPY continues to lose ground for the fourth consecutive day and falls to a more than one-month low.
- Diverging expectations of Fed and BoJ monetary policy are proving to be a key factor exerting downward pressure.
- Bears take a brief pause and now await the US NFP report before positioning for further losses.
The USD/JPY pair remains under some selling pressure for the fourth consecutive day and drops to a more than one-month low around the 142.00 level on Friday. However, spot prices trim some of the intraday losses and climb back above the 142.50 area during the first half of the European session amid some repositioning trades ahead of the crucial US monthly jobs data.
The popularly known Non-Farm Payrolls (NFP) report will play a key role in influencing expectations about the Federal Reserve’s (Fed) monetary policy path and boosting demand for the US Dollar (USD). However, any meaningful recovery for the USD/JPY pair seems elusive in light of the divergent monetary policy outlooks of the Fed and the Bank of Japan (BoJ). In fact, markets are pricing in a 40% chance of the US central bank cutting borrowing costs by 50 basis points (bps) by the end of the September 17-18 monetary policy meeting.
Bets were reinforced by some rather unimpressive US macroeconomic data released this week, which pointed to a cooling labour market and suggested the economy is at risk of slowing. In contrast, BoJ Governor Kazuo Ueda reiterated earlier this week that the central bank will continue to raise interest rates if the economy and prices perform as expected. Moreover, an unexpected rise in real wages in Japan for the second consecutive month in July keeps the BoJ on track for another rate hike in 2024.
Apart from this, renewed concerns about a US economic recession, coupled with persistent geopolitical tensions, could continue to support the traditional safe-haven Yen and help limit the upside of the USD/JPY pair. Therefore, any attempt at a meaningful recovery could still be seen as a selling opportunity and risk fading quickly. Nevertheless, spot prices remain on track for sharp weekly losses and look vulnerable to extending a nearly two-month downtrend.
Economic indicator
Nonfarm payrolls
The most important result contained in the employment situation report is the monthly change in non-farm payrolls published by the US Department of LaborThe report publishes estimates of job creation for the previous month and revisions to the data for the previous two months. Monthly changes in payrolls can be very volatile and the release of this report generates high volatility in the dollar. A result above the market consensus is bullish for the dollar, while a result below expectations is bearish.
Next post:
Fri Sep 06, 2024 12:30 PM
Frequency:
Monthly
Dear:
160K
Previous:
114K
Fountain:
US Bureau of Labor Statistics
The US monthly employment report is considered the most important economic indicator for currency traders. Released on the first Friday following the reported month, the change in the number of employees is closely linked to the overall performance of the economy and is monitored by policymakers. Full employment is one of the Federal Reserve’s mandates and it considers developments in the labor market when setting its policies, which affects currencies. Despite several leading indicators shaping estimates, Nonfarm Payrolls tends to surprise markets and trigger substantial volatility. Actual figures that beat consensus tend to be bullish for the USD.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
