In the North American trading session on Thursday, USD/JPY inched down towards the 150.50 mark following the release of the latest Initial Jobless Claims data from the United States, covering the week ending November 29. The numbers revealed a higher-than-anticipated 224,000 first-time unemployment benefit claims, surpassing the previous forecast of 215,000.
This uptick in jobless claims reignited concerns about weakening job demand, resulting in a decline for the US Dollar Index (DXY), which dropped below the crucial 106.00 support level. With this scenario unfolding, investors are eagerly awaiting the upcoming US Nonfarm Payrolls (NFP) figures for November to gain further insights into the health of the labor market.
There’s speculation among economists that the United States could see the addition of 200,000 new jobs, a significant leap from the mere 12,000 added in October. It’s worth noting that last month’s payroll figures were impacted by hurricanes disrupting several industries. Furthermore, predictions suggest that the unemployment rate may edge up to 4.2% from the previous 4.1%.
Market participants also have their eyes on the US Average Hourly Earnings data, which will offer valuable insights into wage growth trends. A rise in wages tends to fuel consumer spending, potentially driving up inflation and heightening concerns about persistent price pressures. Such a situation could also influence the Federal Reserve’s stance on interest rates at its December meeting.
According to the CME FedWatch tool, there is now a 74% likelihood that the Federal Reserve will lower its key borrowing rates by 25 basis points, bringing them to a range of 4.25%-4.50%, while the remaining 26% anticipate maintaining the current rates.
On the other side of the Pacific, the Japanese Yen is experiencing widespread weakness. This comes in the wake of dovish remarks from Toyoaki Nakamura, a board member of the Bank of Japan (BoJ), who expressed skepticism regarding the bank’s ability to implement further interest rate hikes. Nakamura voiced concerns over the ongoing sustainability of wage growth and cast doubt on maintaining inflation above 2% beyond fiscal year 2025.
