USD/JPY slips as Greenback weakens, Fed rate cut bets hinge on delayed US data

The Japanese Yen (JPY) strengthens against the US Dollar (USD) on Thursday, with USD/JPY snapping a four-day winning streak as the Greenback extends its recent slide. At the time of writing, the pair is trading near 154.35, hovering just below the nine-month high of 155.05 reached on Wednesday.

The upbeat tone following the deal to end the United States (US) government shutdown has done little to lift the Dollar. Instead, renewed caution is building ahead of the incoming wave of delayed US economic data, which could shape expectations for a potential Federal Reserve (Fed) rate cut in December.

White House Senior Adviser Kevin Hassett told Fox News that the September nonfarm payrolls print is likely to arrive next week, saying the report is “already cooked.” Hassett also warned that the shutdown could shave 1.5% off Q4 GDP, underscoring the economic drag from the prolonged government closure.

As traders gear up for the upcoming batch of delayed US data, the Federal Reserve’s cautious stance is keeping December rate-cut expectations uncertain. While the labor market is showing signs of cooling, policymakers continue to highlight that inflation remains the primary concern, limiting room for immediate easing.

Boston Fed President Susan Collins reiterated that there is a “relatively high bar for additional easing in the near term,” stressing that the Committee must be confident inflation is on a durable path back to 2% before considering further cuts. San Francisco Fed President Mary Daly echoed this view, noting that the labor market “has slowed quite a bit” and inflation is easing but “still stubborn,” adding it is “premature to say definitely a cut or no cut in December.” Minneapolis Fed President Neel Kashkari added to the cautious tone, saying he sees “mixed signals” in the economy and warning that inflation remains “too high at 3%.”

However, any meaningful recovery in the Yen remains limited by Japan’s expansionary fiscal stance and the Bank of Japan’s (BoJ) cautious approach to policy normalization. That said, the market is increasingly weighing the prospect of intervention as USD/JPY trades near sensitive levels.

Adding to the focus, Prime Minister Sanae Takaichi held her first formal meeting with BoJ Governor Kazuo Ueda on Thursday. The PM stated that “we will continue to request that the BoJ Governor provides regular reports to this Council on Economic and Fiscal Policy. The government and the BoJ will continue to work together to advance the national economy.”