USD/JPY Seeks Hawkish Confirmation in Labor Market Data

The US dollar against the Japanese yen (USD/JPY) has finally regained some of its lost momentum, thanks in part to a recent speech by Fed Chair Kevin Warsh that restored some of the Federal Reserve's inflation-fighting credibility. This led to a significant increase in pricing for a Fed rate hike this year, pushing USD/JPY to levels not seen since July.

The week ahead will be dominated by major US labour market data, including non-farm payrolls for August on Friday. The employment mandate is set to take centre stage as the Fed focuses on maximum employment, with the potential to challenge the hawkish repricing seen in recent days.

Average hourly earnings and unemployment rate are key metrics that will be closely watched, particularly if participation rates fail to increase after eight consecutive months without growth. Historically, once the Fed starts hiking, it rarely stops at just one move.