The US dollar slightly declines from three-month highs. Investor attention is currently on the Nonfarm Payrolls employment report for February. Therefore USD/JPY remains steady.
The USD/JPY pair is unchanged at 137 and trading within its daily range of 136.47 to 137.91. The USD is slightly lower than three-month highs hit earlier on Wednesday due to Federal Reserve Chairman Jerome Powell’s speech on Tuesday.
When the Fed chair stunned investors with a more hawkish rate forecast, the US Dollar index, DXY, rose to 105.88, its highest level since December 1. In response to recent strong data, Powell stated that the Fed would likely need to raise interest rates more than anticipated. Powell also stated that the Fed is ready to take more drastic action if the “totality” of incoming information indicates that more stringent measures are required to control inflation.
Because of this, the Fed funds futures markets now predict a 50 basis-point raise on March 21–22 with a 66% likelihood, up from 22% before Powell’s speech on Tuesday. The rate is anticipated to reach its high in September at 5.62%. In the future, 25 bp rises in May and June are anticipated to raise the Fed Funds rate to 5.50–5.75%. About 30% of analysts at Brown Brothers Harriman believe that a last 25 bp boost in Q3 would raise the target range to 5.75–6.0%.
Yet, with a substantially lower probability, an easing cycle is still predicted to start in Q4. It should eventually be entirely and unambiguously priced out into 2024 during the next Fed repricing cycle. We now think that the upward trends in US rates and the USD are still valid,” the experts said.
Investor attention is now on the February Nonfarm Payrolls employment report, which is coming on Friday. After a 517k gain in January, another 280k increase would be unquestionably substantial, according to Societe Generale analysts. The January gain could get a bigger giveback, likely assisted by the mild weather. We consider results over a 150,000–175,000 level to be robust because, over the term, they would support further decreases in the unemployment rate.
