USD/JPY non-farm payrolls data triggered a sharp move as the pair climbed above 160 before falling back. The US jobs report showed 172,000 jobs created in May, well above the expected 85,000. Additionally, the previous two months’ figures were revised upward by a combined 72,000 jobs, indicating a strong labor market.
USD/JPY non-farm payrolls impact
Following the report, USD/JPY rose from 159.88 to 160.22. However, the pair then dropped by 50 pips, reflecting concerns about potential intervention by the Japanese Ministry of Finance. The last time USD/JPY reached similar levels in late April, the MOF intervened and pushed the pair down to 155.75 quickly. Traders buying at this level are speculating that intervention may not occur this time.
US two-year Treasury yields increased by 9.6 basis points to 4.14% after the release. Market expectations now fully price in a Federal Reserve rate hike in December, with September becoming a key focus. The probability of a September rate increase has risen sharply to nearly 50%.
Fed outlook after strong jobs data
The strong employment figures challenge the Federal Reserve’s dovish stance on the labor market. Inflation remains a concern at 3.8%, which the Fed will need to address. The new Fed chair, Kevin Warsh, who succeeded Jerome Powell, faces pressure to raise rates despite previous indications of potential cuts. This jobs report adds to concerns that the Fed may be falling behind the curve in managing inflation.
The report highlights ongoing factors influencing inflation, including fiscal deficits, geopolitical tensions, immigration trends, and economic cycles related to technology investment and trade policies. These elements contribute to the complex environment the Fed must navigate.
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