The United States dollar strengthened and touched a 2.5-year highest level against the Yen in the early-week trading. This was happened after the disappointing NFP data last week.
That position did little to change the market expectations of the Fed's tapering outlook. At the time this news was revealed, the USD/JPY pair was in the range of 112.34 in the market.
It means that the currency was sstrengthening by 12 percent from the daily opening level. The non farm payroll release in the United States of America still has an effect.
The release of that NFP data in September on Friday last week with the least pace of job growth in nine months did have little effect on the movement of the US dollar on a limited basis.
The Inflation Pressure will Still Increase
However, the unemployment rate data in the America that fell to an 18-month low of 4.8 percent further boosted workers' wages by 0.6 percent in September.
It means that the inflationary pressures are expected to continue to rise in the upcoming months. That is going to support the Fed's tapering outlook in the near term.
Although the NFP numbers are slowing down, when people look at the details, the outlook for the U.S economy remains strong. The impact is not that big and everything is quite stable.
The analysts see, nothing will deter the Fed from tapering immediately next month. This opinion was stated by shinichiro kadota as a currency strategy analyst at Barclays, in a note.
USD/JPY is in the Peak Position
Kadota then added that the USD / JPY pair is now at the upper end of the peak range in 2019. It means that there is a possibility of a massive sell-off to happen in the market.
However, if it can break through that level then the market participants will see the dollar strengthen to the level of 113 or even 114 quite easily. How is this possible?
In addition to the fed's still solid outlook next month, the strengthening of the United states dollar against the Yen this morning was actually supported by a rise in 10-year bond yields in America.
It is especially toward a four-month high of 1.617 percent. This increases the greenback's appeal in the eyes of investors thus unwinding yen holdings and switching towards the USD.
What is the Market’s Next Focus?
The market's next attention is on the release of the US consumer inflation data scheduled for Wednesday. If that inflation release shows a higher-than-expected increase, what will be happened?
In fact, that condition will also revive the prospect of an acceleration in the Fed's rate hike. Furthermore, that will also push the United States dollar to strengthen further in the future.
It is especially against the other major currencies so far in the market. Elsewhere, the gold price was decreasing on Thursday because of the early week unemployement claim which also declined.
That was ahead of this last week monthly job data and it supported the Treasury Yield. Furthermore, that also supports the speculation that the Fed will start to reduce their economy support.
America Has a Better Economy Situation
The spot of gold declined by 0.3% in $1,757.30 per ONS. The United States gold was stay lower in $1,759.2. The number of Americans filing new claims for unemployment benefits fell.
That showed the bigger decline in three months last week. The moment like that is suggesting that the labor market recovery is regaining momentum after the recent slowdown. The report helped push the bond yields up and slightly rallied the stock market in the America.
Then that is squeezing gold where it is stated by Jim Wyckoff, a senior analyst at Kitco Metals. The Stimulus reductions and higher interest rates lift bond yields are translated into the raising opportunity costs holding the gold bullion that provides no yield.
