USD/JPY Pulls Back as Markets Question Hawkish Tone
The USD/JPY pair has pulled back to the 159.50 area after Friday's highs at 160.20, as the US Dollar pulls back against its main peers in the European session.
The rally across the board on Friday was driven by Federal Reserve Chairman Kevin Warsh's hawkish tone, affirming that policymakers have 'work to do' to bring inflation to the bank's 2% target.
Investors took those comments as a signal of an interest rate hike in September, but markets are questioning that view on Monday.
The US payrolls data will provide further insight into September's Fed decision and whether a 'durable USD rebound' is possible, according to TD Securities, which depends on 'stronger policy follow-through & renewed upside in US data'.
A stronger print on the Nonfarm Payrolls (NFP) report could cause a sharper reaction than a subdued employment report, suggesting that labor market data could be a key catalyst for near-term Dollar moves.