The USD/JPY strengthened to touch a 2.5-year high in Monday trading. Although the NFP was released disappointingly late last week, the market expectations of the Fed's tapering outlook have not changed much.
At the time this news was taken down, the USD/JPY pair was in the range of 112.34. It means that the pair was strengthening by 0.12 percent from the daily opening level.
The September's NFP data did suppress the pace of movement of the US dollar on a limited basis as it slumped to its lowest in nine months. That can be seen from the data so far.
However, the United States unemployment rate fell to an 18-month low of 4.8 percent. Furthermore, the workers' wages grew better than expected in September.
America Still Has the Strong Economy Outlook
The situation above means that the inflationary pressures are expected to continue to rise in the months ahead. They are supporting the Fed's tapering outlook in the near term.
Although the NFP numbers are slowing, when you look at the details, the outlook for the U.S. economy remains strong. We see, nothing will deter the Fed from tapering up next month.
That was stated by Shinichiro Kadota as a currency strategy analyst at Barclays in a note. Kadota added that the USD/JPY is now in the peak range of 2019, so there is a possibility of a massive sell-off after this.
However, if the price can continue to rise through that level, then people will see the US Dollar strengthen to the level of 113. That is even able to reach the 114 level quite easily.
Greenback is Now More Popular
Despite the Fed's solid outlook next month, the strengthening of the USD against the yen this morning was also supported by a rise in 10-year bond yields at a four-month high in the America.
This further increases the attractiveness of the Greenback in the eyes of investors. That is why; it is natural that the position of the US Dollar against the Yen is getting tougher.
The market's next attention is on the release of the America’s consumer inflation data scheduled for Wednesday. If inflation shows a higher-than-expected increase, What Is the meaning?
Basically, it means that the dollar could strengthen further because of the prospect of accelerating the Fed's rate hike. That is the strongest possibility to happen in that condition.
Meanwhile, Pound Sterling is Stronger
Elsewhere, The pound sterling gained about 0.3 percent to a high of 1.3670s against the U.S. dollar. That is happened in an early European trading today Based on the data.
It is following the hawkish comments from a number of top British central bank (BoE) officials. The same catalyst also helped sterling cripple the euro and the Japanese yen so far.
The BoE governor, Andrew Bailey, again signalled that he would raise the interest rates in the near future. He expressed his concern about the pace of inflation possibly exceeding the target.
Furthermore, the central bank should "prevent it from being permanently entrenched". By raising the interest rates, central banks can put the brakes on inflationary pressures from within the country.
It is not the First Hawkish Comment
This isn't the first hawkish comment that Bailey has made. At the end of September, he stated that the BoE's interest rate could be raised even though Quantitative Easing was still ongoing.
The comments have generated speculation around the prospect of a BoE rate hike in the first half of next year or even before the end of the year. Bailey's comments in the Yorkshire Post provoked similar speculation.
Moreover, a number of other BoE officials also conveyed the similar discourse in recent days. Signals of a BoE rate hike drew investor attention to UK financial assets, so the pound strengthened.
