USD/JPY has posted losses in the Thursday session, erasing the gains seen on Wednesday. In North American trade, USD/JPY is trading at 113.96, down 0.27% on the day. On the release front, Japanese Consumer Confidence improved to 44.5, beating the estimate of 43.6 points. In the US, today’s highlight was unemployment claims, which dropped to 229 thousand. This beat the estimate of 235 thousand. The focus will be on employment numbers on Friday, as the US releases Average Hourly Earnings, Nonfarm Payrolls and the unemployment rate. We’ll also get a look at ISM Nonfarm Manufacturing PMI.
The Federal Reserve rate statement was expected to be little more than a run-up to the December rate decision, and indeed there were no surprises from Janet Yellen and Co. The Fed indicated that a rate increase is very likely at the December meeting, and was careful not to change any of the wording in its statement regarding future rate hikes. The rate statement noted that hurricanes which hit the US had caused a decline in payrolls in September, but the Fed did not expect the hurricanes to "materially alter the course of the national economy over the medium term." The markets are expecting a strong rebound in nonfarm payrolls – the forecast for Friday’s US nonfarm payrolls is a robust 311 thousand, after a decline of 33 thousand in September. Still, wage growth, which was remained soft despite the strong economy, is expected to slow to 0.2 percent, as inflation remains the Achilles heel of a robust US economy.
With fed futures prices in at 96 percent, a December rate hike from the Fed appears a done deal. What can we expect in 2018? This will depend to a large degree on the new chair of the Fed, who will take over from Janet Yellen in February. Janet Yellen will wind up her 3-year term in February, and she is not expected to be reappointed by President Trump. The front runner is economist Jerome Powell, who is expected to maintain the Fed’s current policy of small, incremental rates. Trump is expected to make his choice later on Thursday, and the markets could react once the new Fed chair is announced.
