Following Friday’s weak US payroll report from ADP, the USD/JPY plunged to a weekly low of 114.16. Interest rates were raised by 0.25 percent to 0.5% by the Old Lady of Threadneedle Street (BoE). Moreover, in March, the governors approved a passive draw from the balance sheet. Though, most of the Monetary Policy Committee wanted to double the rate hike to 0.5%.
Another shock came from Christine Lagarde, President of the European Central Bank, who noted that inflation has risen on the continent. ADP reported a loss of 301k and the start of claims for five weeks, causing the market to turn negative. On the other hand, Friday’s nonfarm payrolls in the US jumped by 467k, well beyond the estimate of 150k.
Revised NFP numbers were modestly positive for the year, increasing 217k. Although November and December jobs increased by 709k to 647k and 510k, respectively, the end of the year was stronger than the original estimates. Participation in the labor force increased to 62.2%, the highest level since March 2020, showing that people are returning to the labor market in large numbers. Despite inflation and a number sure to catch the Fed’s attention, wages rose 0.7% m/m and 5.7% y/y.
On Thursday, US inflation is expected to continue rising with a headline forecast of 7.3% and a core forecast of 5.9%. Japan’s data consists of the coincident and leading economic indicators for December, Eco Watchers surveys, and producer price indices for January.
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