USD/JPY Nearing Record Highs Amid Firm US Labor Data, Fed’s Rate Policy Caution

The USD/JPY pair is hovering close to historic peaks near 152.00, buoyed by robust private labor demand in the US and tempered expectations of Federal Reserve rate cuts.


Market sentiment remains uncertain regarding Japan’s wage growth trajectory. In Wednesday’s early American session, USD/JPY surged to 152.00, with expectations for further gains as the Fed signals a cautious approach to reducing interest rates. Fed policymakers, including Cleveland Fed Bank President Loretta Mester, emphasize the solidity of the labor market and economic outlook, suggesting a reluctance to implement early rate cuts.

Mester deems three rate cuts as reasonable this year but emphasizes the risks of acting prematurely. The upbeat US ADP Employment report for March, indicating 184K new hires by private employers, surpassed expectations, further supporting the notion of a robust labor market.

Attention now turns to Fed Chair Jerome Powell’s speech, anticipated to provide insights into the central bank’s timing for potential rate adjustments. Concurrently, the Japanese Yen faces broad weakness amid doubts about the Bank of Japan’s prompt policy tightening in light of ongoing wage growth uncertainties. Investor concerns regarding potential Japanese intervention in the foreign exchange market appear to have abated.

Trade Idea:

Consider long positions on USD/JPY, anticipating continued upside momentum driven by strong US labor data and Fed’s cautious stance on rate cuts.

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