Increasing speculation about multiple 2025 BoJ rate hikes could strengthen the Yen, pushing USD/JPY toward the September low of 139.576 and potentially triggering a Yen carry trade unwind.
USD/JPY Trends: US Services Sector and Labor Market in Focus
Later in the US session, two crucial reports will influence Fed rate cut bets and USD/JPY trends.
Economists expect the ADP to report an increase of 140k jobs in February, down from 183k in January. A softer reading would signal weakening labor market conditions, boosting bets on an H1 2025 Fed rate cut. However, a stronger-than-expected report could signal a more hawkish Fed stance.
Meanwhile, economists forecast the ISM Services PMI to increase to 52.9 in February, up from 52.8 in January. A surprise drop below the 50 neutral level could fuel recession fears, supporting a more dovish Fed rate path. Conversely, a higher-than-expected reading may delay Fed rate cuts.
Upbeat US data would likely temper expectations of a June Fed rate cut, supporting a USD/JPY climb toward the 200-day Exponential Moving Average (EMA) and the 152 level. Conversely, a service sector contraction and a weaker labor market could drag the USD/JPY below 148.
Beyond the numbers, investors should closely monitor US tariff policies and FOMC members’ views on inflation, employment, and the Fed’s rate path.