Forex Today: Japanese Yen experiences strong volatility, markets await US NFP data
Here is what you need to know on Thursday, July 2:
The Japanese Yen is fluctuating in a wild range in the European session on Thursday, signalling a possible currency intervention. In the second half of the day, the United States (US) Bureau of Labor Statistics (BLS) will publish the employment report for June, which will feature Nonfarm Payrolls, Unemployment Rate and wage inflation figures.
USD/JPY spent the first half of the Asian session in a tight range at around 162.50. At the beginning of the European session, the pair declined sharply and lost more than 100 pips in a matter of minutes. After coming in within a touching distance of 161.00, the pair managed to recover quickly toward 162.00 but failed to gather momentum. USD/JPY continues to stretch lower and was last seen losing about 0.8% on the day below 161.50.
Toshihiro Nagahama, a key private-sector member on Japanese Prime Minister Takaichi's Council on Economic and Fiscal Policy, said earlier in the day that the Bank of Japan (BoJ) should continue to raise rates at a moderate pace, arguing that delaying rate hikes would cause an excessive decline in the Japanese Yen and hurt households more.
Japanese Yen Price Today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.28% | -0.47% | -0.73% | -0.12% | 0.03% | -0.15% | -0.38% | |
| EUR | 0.28% | -0.19% | -0.44% | 0.15% | 0.30% | 0.15% | -0.10% | |
| GBP | 0.47% | 0.19% | -0.24% | 0.32% | 0.50% | 0.35% | 0.10% | |
| JPY | 0.73% | 0.44% | 0.24% | 0.60% | 0.77% | 0.57% | 0.36% | |
| CAD | 0.12% | -0.15% | -0.32% | -0.60% | 0.15% | -0.01% | -0.25% | |
| AUD | -0.03% | -0.30% | -0.50% | -0.77% | -0.15% | -0.15% | -0.40% | |
| NZD | 0.15% | -0.15% | -0.35% | -0.57% | 0.01% | 0.15% | -0.25% | |
| CHF | 0.38% | 0.10% | -0.10% | -0.36% | 0.25% | 0.40% | 0.25% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
The US Dollar (USD) Index edged higher on Wednesday but erased a portion of its daily gains to close with small gains. The data from the US showed that the Institute for Supply Management's (ISM) Manufacturing Purchasing Managers' Index (PMI) declined to 53.3 in June from 54 in May. More importantly, the Prices Paid Index, the inflation component of the PMI survey, declined sharply to 73 from 82.1. Early Thursday, the USD Index declines toward 101.00, losing about 0.4% on the day.
Warsh rejects forward guidance but doubles down on 2% inflation goal
Federal Reserve (Fed) Chair Kevin Warsh delivered a moderately hawkish message while speaking at the ECB Forum on Central Banking, with a FXS Speechtracker score of 5.6/10. The refusal to provide forward guidance, coupled with a strong reaffirmation that inflation above 2% will disappoint the Fed and that the US is likely to be a big winner in the AI boom, underscores a focus on price stability amid steady labor markets and a solid supply side. Warsh’s emphasis that it is up to the central bank to judge whether AI is inflationary signals a willingness to “chart a new course” in policy frameworks without committing to a preset path.
Gold (XAU/USD) climbed above $4,100 on Wednesday but lost its traction in the American session to close the day slightly higher. XAU/USD holds its ground and trades in positive territory above $4,050 in the European session on Thursday.
GBP/USD gathers bullish momentum in the European morning and climbs toward 1.3350, rising more than 0.5% on the day.
Bailey holds rates but keeps future cuts in check, supporting GBP
BoE Governor Bailey’s speech on Wednesday scored 6/10 on FXS Speechtracker, notably above the historic average of 4.7/10, signaling a firmer policy tone. Emphasis on a “softening economy, labour market” and the decision not to raise rates based on this weakness points to a cautious stance, but not an aggressively dovish pivot.
The explicit comment that “rate cuts [are] off the table at the moment” and that the committee will “return to it in July” introduces a mildly hawkish tilt relative to the soft data backdrop. This combination of acknowledging economic softness while ruling out immediate easing supports GBP by reducing near-term expectations for policy loosening, even as the delayed reaction to energy prices keeps the outlook data-dependent.
EUR/USD gains traction in the European session and trades above 1.1400. The data from the Euro area showed on Wednesday that the Harmonized Index of Consumer Prices rose by 2.8% in June. This print followed the 3.2% increase recorded in May and came in below the market expectation of 3%.
Nonfarm Payrolls FAQs
What are Nonfarm Payrolls?
Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.
How does Nonfarm Payrolls influence the Federal Reserve monetary policy decisions?
The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation. A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work. The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.
How does Nonfarm Payrolls affect the US Dollar?
Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower. NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.
How does Nonfarm Payrolls affect Gold?
Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa. Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold. Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.
Sometimes Nonfarm Payrolls trigger an opposite reaction than what the market expects. Why is that?
Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components. At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary. The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.