USD/JPY stable, remains focused on key US data.

• The dollar falls slightly from three-month highs.
• The USD/JPY pair is holding steady as investors now focus on the employment data for February – Non-Farm Payrolls.

The pair USD/JPY It remains sideways around 137 and within a daily range of 136.47-137.91, while the dollar retreated modestly from three-month highs reached on Wednesday following Federal Reserve Chairman Jerome Powell’s intervention on Tuesday.

The Dollar Index, DXY, hits 105.88, the highest level since December 1, as the Fed Chairman surprised markets with a more aggressive outlook. Powell said the Fed will likely have to raise interest rates more than expected in response to recent strong data and is prepared to move in larger steps if the “totality” of incoming data suggests tougher action is needed to control inflation.

This has led Fed funds futures markets to put a 66% probability of a 50 basis point hike at the March 21-22 Fed meeting, up from 22% earlier. that Powell spoke on Tuesday. Looking ahead, 25 basis point hikes are forecast for May and June, which would put Fed Funds at 5.50-5.75%, with a near 30% chance of a final 25 basis point hike in the third quarter, which would raise the range to 5.75-6.0%,” say analysts at Brown Brothers Harriman.

After all this, an easing cycle is still expected to start in the fourth quarter, albeit with much lower odds. Ultimately, it should be fully and unequivocally priced in until 2024 during the Fed’s next pricing review phase. For now, we believe that the upward trends in US yields and the dollar remain intact,” the analysts added.

Looking ahead, investors are now focused on the February jobs data in the Non-Farm Payrolls which is released on Friday. Another rise of 280,000 would be unmistakably strong after the 517,000 rise in January, according to Societe Generale analysts. ”There is room for a possible further pullback in the January increase, which was probably helped by the warm weather. We view readings above the 150,000-175,000 threshold as robust, as this pace would contribute to further declines in the unemployment rate over time.”