Daily USD/JPY
US Nonfarm Payrolls up 236k in March; Unemployment rate drops to 3.5%
Nonfarm payrolls in the US rose by 236,000 in March, close to the expected figure of 239,000. In addition, the February data was revised upwards to show that 326,000 jobs were created instead of the 311,000 previously reported. The unemployment rate also fell to 3.5% in February from 3.6%. In addition, average hourly wages, indicative of wage inflation, rose 0.3% in March after rising 0.2% in February.
The Fed is expected to maintain the message of higher interest rates
Federal Reserve officials are expected to maintain their message of keeping interest rates higher for an extended period leading up to the May monetary policy meeting, which could strengthen the US dollar.
However, recent economic data suggests that there may be heightened negative economic risks. Should the upcoming inflation and retail sales data disappoint, it could affect these expectations.
Prior to the release of the jobs report, the market had been predicting that the Federal Reserve would make no changes at the May policy meeting. However, following the report, the market now expects a 70 percent chance of a 25 basis point rate hike. Nevertheless, the market also expects several interest rate cuts by the end of the year.
Volatility likely as economic risks remain
Overall, the USD/JPY pair is likely to remain volatile in the coming weeks with the potential for additional gains as the US Federal Reserve sticks to its higher interest rate message.
However, there is also the possibility of downside risks if the upcoming economic data (Consumer Price Index (CPI) report next week) falls short of market expectations. Investors should closely monitor the market for developments that could impact the USD/JPY.