USDJPY Up Ahead Of NFP, While Japan Approves Stimulus

USD continued to advance during Asian trading after the US third-quarter annualised GDP figure came out much better than expected and weekly initial jobless claims declined. However, the underlying data continued to reflect a large build-up in inventories, which will need to be replenished next year against the backdrop of reticent consumers.

Stronger US manufacturing numbers this week were supportive, but the drop in the ISM employment component to 52.5 from 56.2 is worth watching, although this could be the result of year-end planning. The majority of manufacturers are hiring as activity picks up. The macro backdrop is improving, but traders will need further confirmation from the US jobs report on Friday.

USDJPY focus

USDJPY rose above its 30-day short-term moving average, and will need to sustain moves above 102.25 and then 102.50 to pare earlier losses. The profit taking could reflect some nervousness ahead of the NFP number on Friday. The market expects a slower pace of hiring to 185,000 in November from 204,000. Seasonality could be a factor due to the holiday season, but retailers were expecting weaker sales before the Thanksgiving holiday. The ADP number was very strong, but it usually does a poor job of predicting the official NFP number.

The full jobs report will be analysed including labour force participation and average hourly earnings. This will definitely be a key factor as the Federal Reserve takes its time to decide if there is evidence of significant improvement in the labour market before a decision is made to taper asset purchases in the coming months.


Japan’s stimulus package
On Thursday, the Japanese government officially announced that it approved an JPY 18.6 trillion stimulus package in order to curtail the negative impact of the upcoming sales tax hike on the economy. The Cabinet stated that no bonds will be issued to pay for the stimulus package; the money will come from excess tax revenues and unspent funds from “other accounts.”

Bank of Japan (BoJ) governor Haruhiko Kuroda will speak on Saturday. On Monday, Kuroda stated that he sees no need to modifying the BoJ’s two percent inflation target. Despite some downside risks, the BoJ continues to believe that the country is on track to meet its inflation target. Perhaps the new stimulus package will keep monetary policy on hold, but Kuroda will not be asleep at the wheel if reality starts to kick in next year.