USD/JPY is into the intervention danger zone following a strong non-farm payrolls report.
The chart tells the story as the last time the pair traded up here in late April, the Japanese MOF came in with the hammer and knocked it down to 155.75 in short order. Anyone buying here is betting that this time they don’t intervene. In that vein, the pair just quickly fell by 50 pips.
USDJPY 10 mins
The pair rose to 160.22 from 159.88 on the release of the US jobs report. It showed 172K jobs created in May compared to 85K expected. The prior two reports were also revised up by a collected 72K jobs, meaning the past three months have been strong.
That will make it untenable for the Fed doves to maintain their stance that the jobs mandate is problematic. Instead, it’s inflation at 3.8% that’s the problem they will need to address. US 2-year yields are up 9.6 bps to 4.14% on the release and the market is now fully pricing in a hike at the December meeting. September is now the battleground with pricing at close to 50% in a sharp move higher since the release.
The employment numbers will make for an uncomfortable start for new Fed chair Kevin Warsh. He replaced Jerome Powell after many months of Trump heckling the FOMC leader for not cutting rates. Now he’s hand-picked successor — who got the job by talking about cutting rates — may be forced to lift them or risk falling further behind the curve.
Today’s jobs number add to a theme I’ve been writing about frequently: That the Fed is falling behind the curve. There is a powerful elixir driving inflation in the USA that includes huge deficits, the Iran war, low immigration, the Big Beautiful Bill, the AI capex super-cycle, tariffs and now the improving jobs picture.
