US Payrolls Revive Rate Hike Bets as USD/JPY Tumbles

The USD/JPY pair suffered its largest weekly loss since late July as it entered September. This decline was largely due to dovish remarks from senior Federal Reserve officials and possible intervention by the Bank of Japan on behalf of the Japanese government.

However, an unexpectedly strong August payrolls report in the United States managed to revive rate hike bets for the Fed's meeting two weeks later. The report showed 162k jobs added compared with the expected 53k.

Fed funds futures are now back above a 60% probability of a 25bp hike in two weeks, making this week's CPI and PPI figures crucially important. The Trump administration is also urging the Fed not to raise rates, with various officials weighing in on the issue.