- The USD/JPY pair seems set to reverse its recent four-week low, spurred by a revision in US employment figures that boosted the US dollar.
- The updated assessment from the Bureau of Labor Statistics indicates salary figures were overstated by 911,000 jobs through March 2025, suggesting a more significant decline in the labor market.
- The market appears to have already factored in a 25 bps Fed cut next week, with some possibility of a more substantial 50 bps cut depending on upcoming inflation reports.
The Japanese Yen (JPY) gained ground against the US Dollar (USD) on Tuesday. The USD/JPY pair crossed the critical level of 147.00, hitting its lowest point since around 146.31, which was last seen on August 14th. As of this writing, the pair is close to 147.30, with the US dollar recovering slightly from a seven-week low after a modest rebound.
This movement followed the US Bureau of Labor Statistics (BLS) updating the Non-Agricultural Payroll (NFP) benchmark. The revision confirmed that the labor market is cooling down quicker than previously thought, and it reinforces expectations for interest rate cuts during the September 16-17 Federal Reserve meeting.
The US Dollar Index (DXY), which gauges the dollar’s performance against a basket of six major currencies, showed a small recovery after dipping to its weakest level in several weeks. Currently, the index hovers around 97.60, buoyed by a short-covering flow triggered by the BLS revision. Nevertheless, the DXY still faces downward pressure from a dovish outlook from the Fed. The market is almost entirely pricing in a 25 bps cut next week while assigning a small chance to a more significant 50 bps adjustment.
Upcoming data, particularly Wednesday’s producer price index (PPI) and Thursday’s consumer price index (CPI), will be crucial in shaping future expectations. Softer results could bolster the case for deeper easing, whereas stronger figures could help the dollar’s recovery.
Earlier, the Yen found support from a Bloomberg report indicating that Bank of Japan (BOJ) officials are still considering a possible rate hike before the year’s end, despite the political uncertainty following Prime Minister Isba’s resignation. This news briefly impacted the USD/JPY, but the subsequent rebound of the dollar, post-employment revision, has largely mitigated those losses. Going forward, traders will be focused on the BOJ’s policy meeting set for September 18-19, where the central bank is expected to maintain the rate at 0.50%.
