Exploring the impact of US NFP on different asset classes, BOJ will stick with gradualism Exploring the impact of US NFP on different asset classes, BOJ will stick with gradualism Exploring the impact of US NFP on different asset classes, BOJ will stick with gradualism

Exploring the impact of US NFP on different asset classes, BOJ will stick with gradualism

Forex 5 minutes to read
Charu Chanana

Head of FX Strategy

Summary:  Dramatic moves in the yen were underpinned by hawkish bets on Bank of Japan, with the closing window of opportunity creating urgency. As Fed cycle turns and BOJ speculation continues, there is room for yen to continue to rally, but focus is shifting to NFP today ahead of US CPI and Fed meeting next week. A beat on US jobs data could pushback on rate cut expectations for 2024, while a miss will see either goldilocks continue unless unemployment rate also rises.

JPY: Risk of waves of further appreciation

Yen rallied sharply yesterday on traders increasing their bets of a BOJ exit. Bank of Japan governor Ueda’s comments yesterday still emphasized that BOJ will continue patient monetary easing, but there were elements of hawkishness such as a comment that it will become even more challenging to maintain easy policy towards the end of this year and into early 2024. He also said that BOJ has not decided whether to keep interest rate at zero or move it up to 0.1%, and at what pace short-term rates will be hiked after ending negative rate policy. This pushed the markets to price in odds of a tweak at the BOJ’s December 19 meeting.

The November global bond rally also suggests that the situation could be favorable for BOJ to tweak earlier than previously expected. Lastly, BOJ's timeframe to exit negative rates is tight now, they need to get there before other central banks start cutting rates. From a macro lens as well, inflation could ease significantly as supply chains normalize and energy prices cool, closing the potential window to tighten policy. This could mean a tweak in January or even December, but we continue to think that the BOJ tweak will be moderate. 

There is significant room for yen to rally both on a positioning and valuation basis. However, there is still scope for the ride to be bumpy as dollar finds support if US data stays resilient and Fed pushes back on rate cut expectations. But a top for USDJPY in this cycle is likely behind us, and as the yen appreciates, investors need to watch for any short yen squeeze or forced unwinding of carry trades. Volatility in yen is likely to pick up as traders assess the path of Fed rate cuts while speculations of a BOJ exit continue to build. Today’s NFP could be key, followed by CPI and the Fed’s dot plot next week.

Market Takeaway: A turn in Fed policy and speculation for a BOJ exit could continue to fuel waves of yen rallies on US data disappointment or dovish Fed commentaries. Key level in USDJPY could be the 200DMA and yesterday’s low at 141.71. EURJPY’s support at 200DMA and yesterday’s low of 153.23, and the 153 handle.

Source: Bloomberg

NFP Preview: Risks skewed towards an upside surprise

Big focus today is the US jobs data which could be a test of whether the pace of Fed easing priced in by the markets is justified or not. Market is expecting a strong headline jobs number as the resolution of the UAW strikes could mean that a lot of workers came back to the labor market. Unemployment rate may therefore be a bigger focus today, and any rise towards the 4% mark can spook concerns that the labor market is cooling. Labor data so far this week has been mixed, with JOLTS and ADP conveying a weakening labor market, but jobless claims last night still holding up possibly due to Thanksgiving and holiday-related hiring.

Consensus expects headline jobs to be up 183k in November from 150k previously. Unemployment rate is seen to remain unchanged at 3.9% and wage growth is likely to soften to 4.0% YoY from 4.1% previously.

If we get a beat on the headline expectations, that could push back on the rate cuts priced in for next year. This could see yields rising and pressure on equities, particularly the tech sector. USD could reverse higher, with the DXY index likely to be back above 104. The currencies that stand to lose the most on dollar strength include EUR (with EZ inflation easing suggesting more room for ECB dovish repricing) and AUD (after a dovish hold last week). Gold could also test the $2,009 support again.

If the headline is weaker than expected, but unemployment rate is steady, that could potentially fuel a continuation of the current goldilocks that market is pricing in. This means that equities can continue to run higher as yields plunge again, but FX may be a better play here. USD could extend its bearish momentum, with Gold and yen standing the most chances to gain. NZD and GBP could also hold up as further Fed dovish re-pricing takes place.

Biggest risk comes from a scenario where we get a headline miss, along with higher unemployment number. This could shift the market sentiment away from goldilocks to start to price in a recession, and equities stand to lose the most in that case despite the lower yields. USD could be sideways as a safety bid comes through, but Gold and yen still stand to gain. 


Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.