Over the past few trading sessions, the Japanese yen (JPY) has become one of the weakest currencies. So it’s treading very close to the danger line of 155 compared to the US dollar (USD). New finance minister Shunichi Katayama has sounded the alarm to market players over sudden, “one-sided” currency moves. This drama is emblematic of broader instability in currency markets particularly as investors begin to scan for economic fundamentals and various central bank pivots.
Policymakers are watching inflation like a hawk. To get a 2% reduction in inflation by the beginning of 2026, we have to start regularly getting increases of 0.1% monthly in the headline CPI. This long-term outlook invites a discussion on the future course of monetary policy and how it is likely to affect national economic prosperity.
The upcoming release of delayed Non-Farm Payroll (NFP) data is anticipated within two to three days following the US government’s reopening. This data will provide further insights into the labor market and its implications for the Federal Reserve’s monetary policy decisions. Further, there are some major conversations happening within the Federal Reserve about interest rates. For now at least, Governor Miran is on board with a 50 basis points cut in December. His position is consistent with the dovish mood of many Fed members.
Meanwhile, the USD is on a long-term death march. This trend was underscored by the most recent ADP jobs report, which showed a decline of 11,500 jobs in the private sector. These big numbers have fueled speculation as to where our monetary policy is headed next, and some extreme shifts in market sentiment.
In the political arena, UK markets are currently a flutter with rumors about the risks of early challenges to Prime Minister Keir Starmer leadership. Yet political stability continues to be a concern for investors as they look past the immediate economic picture.
Former President Donald Trump has weighed in on economic matters, suggesting that US inflation could reach 1.5% “pretty soon.” His comments indicate a desire for the Federal Reserve to consider rate cuts as a means of stimulating economic growth.
Things are very quiet on today’s market activity as there is nothing major on the data report slate to shake things up. A number of Federal Reserve talkers, including Williams, Paulson, Waller and Miran will be speaking to the public. Nearly all of these officials are recognized doves, which would allow them to have an even greater impact on shaping market expectations about the future path of interest rates.