USD/JPY slides as US shutdown fears boost Yen’s safe-haven appeal

The Japanese Yen gains as USD/JPY falls for a third straight session amid safe-haven demand.
The Greenback stays on the defensive as investors brace for a potential US government shutdown.
Focus turns to Wednesday’s Japanese Tankan survey and US ADP Employment and manufacturing PMI releases.

Vishal Chaturvedi FXStreet

The Japanese Yen (JPY) gains traction against the US Dollar (USD) on Tuesday, with USD/JPY extending losses for a third straight day as the looming United States (US) government shutdown weighs on the Greenback and bolsters safe-haven demand for the Yen. At the time of writing, the pair is trading near 147.85, down nearly 0.5% on the day.

Investors largely shrugged off Japan’s weak economic activity data released earlier in the day, instead turning their attention to the political gridlock in Washington. US President Donald Trump, speaking at the White House on Tuesday, warned that “we’ll probably have a shutdown” and said his party “can cut benefits” as part of spending negotiations, adding that “Democrats are taking a risk” by resisting his proposals.

Chicago Fed President Austan Goolsbee said on Tuesday that short government shutdowns have little impact on the economy, but cautioned that the overall effect depends on the breadth and duration of the shutdown.

The remarks came as a Tuesday midnight deadline looms, leaving the government on track for a potential shutdown from Wednesday unless lawmakers strike a last-minute deal.

Beyond the shutdown debate, Goolsbee said the US labor market remains “pretty steady,” noting that while payroll growth is slowing, other job indicators have stayed broadly stable. He also warned that the country “seems to be headed into a new wave of tariffs,” adding that he hopes these measures prove to be a one-time, moderate price increase. Goolsbee cautioned that if inflation proves more persistent, it would pose a difficult scenario for the Federal Reserve.

Across the Pacific, US macro releases offered limited support to the Dollar. The Conference Board’s Consumer Confidence Index dropped to 94.2 in September from a revised 97.8 in August, while JOLTS Job Openings for August edged up to 7.23 million from 7.21 million in July, broadly in line with expectations.

Looking ahead, focus shifts to upcoming economic data from both sides of the Pacific. In Japan, the third-quarter Tankan survey is due on Wednesday, while in the United States, attention turns to the ADP Employment Change report along with S&P Global’s and ISM Manufacturing Purchasing Managers’ Index (PMI) readings, also scheduled for Wednesday.

Economic Indicator

ADP Employment Change

The ADP Employment Change is a gauge of employment in the private sector released by the largest payroll processor in the US, Automatic Data Processing Inc. It measures the change in the number of people privately employed in the US. Generally speaking, a rise in the indicator has positive implications for consumer spending and is stimulative of economic growth. So a high reading is traditionally seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.

Why it matters to traders?

Traders often consider employment figures from ADP, America’s largest payrolls provider, report as the harbinger of the Bureau of Labor Statistics release on Nonfarm Payrolls (usually published two days later), because of the correlation between the two. The overlaying of both series is quite high, but on individual months, the discrepancy can be substantial. Another reason FX traders follow this report is the same as with the NFP – a persistent vigorous growth in employment figures increases inflationary pressures, and with it, the likelihood that the Fed will raise interest rates. Actual figures beating consensus tend to be USD bullish.

Author

Vishal Chaturvedi

FXStreet

I am a macro-focused research analyst with over four years of experience covering forex and commodities market. I enjoy breaking down complex economic trends and turning them into clear, actionable insights that help traders stay ahead of the curve.

EUR/USD stays well offered below 1.1800

The selling pressure on EUR/USD is picking up pace, with the pair slipping decisively below the key 1.1800 level and sliding to fresh two week lows as Wednesday’s session draws to a close. The move lower comes as the US Dollar finds renewed strength after the latest round of US data and the release of the FOMC Minutes. Next of note on the docket will be the US weekly Initial Jobless Claims.

GBP/USD reaches multi-day lows near 1.3500

GBP/USD reverses its initial upside momentum and is now adding to previous declines, approaching the 1.3500 region on Wednesday. Cable’s downtick comes on the back of decent gains in the Greenback and easing UK inflation figures, which seem to have reinforced the case for a BoE rate cut in March.

Gold battle to regain $5,000 continues

Gold is back on the front foot on Wednesday, shaking off part of the early week softness and challenging two-day highs near the $5,000 mark per troy ounce. The move comes ahead of the FOMC Minutes and is unfolding despite an intense rebound in the US Dollar.

Bitcoin has found or is near a bottom, extended consolidation to follow: K33

Bitcoin (BTC) is nearing or has already established a bottom, which could be followed by a sustained period of slow price movement, according to K33.

Mixed UK inflation data no gamechanger for the Bank of England

Food inflation plunged in January, but service sector price pressure is proving stickier. We continue to expect Bank of England rate cuts in March and June. The latest UK inflation read is a mixed bag for the Bank of England, but we doubt it drastically changes the odds of a March rate cut.

Sui extends sideways action ahead of Grayscale’s GSUI ETF launch

Sui is extending its downtrend for the second consecutive day, trading at 0.95 at the time of writing on Wednesday. The Layer-1 token is down over 16% in February and approximately 34% from the start of the year, aligning with the overall bearish sentiment across the crypto market.