Tokio Marine Asset Management explains the global economic developments of last week that are likely to affect USD/JPY. It reviews the US employment data and comments from senior FRB officials, outlining factors that could influence the future path of interest rates.
In last week's US employment data, nonfarm payrolls (NFP) rose by 29,000 month on month, slowing sharply and falling well below the market forecast of 90,000. The effects of the reversal in the entertainment and hospitality sectors and seasonal adjustments related to the new school year had run their course, while the pace of employment growth remained broadly around 70,000 based on the six-month moving average.
The unemployment rate rose to 4.2% in September, but the actual increase was modest. Together with the improvement in labor-force participation, this points to a recovery in labor supply. Some also viewed the resilience of construction and the relative strength of manufacturing as supporting factors that have kept the economy at cruising speed.
Comments from FRB officials brought the possibility of no rate hike at the October meeting into focus. Vice Chair Jefferson said that “it could take a little more time,” while Vice Chair Bowman said, “I do not see a need for rapid changes in interest rates at this point.” Since the end of forward guidance, markets have remained prone to reacting sensitively to comments from other officials.
Against this backdrop, Tokio Marine Asset Management sets out its market outlook based on last week's global economic developments. This article is a summary of the TMAM Market Weekly, and the full text is available from the company's official information sources.