USD/JPY gains as US Dollar rebounds
The USD/JPY recovers some lost ground near 147.20, snapping the four-day losing streak during the early Asian session on Friday. The potential upside for the pair might be limited as traders continue to assess the impact of a US government shutdown. The US September Nonfarm Payrolls (NFP) report will not be published in light of the ongoing federal shutdown, while the ISM Services PMI and the final S&P Global Services PMI should be published as usual.
US government agencies began shutting down after President Donald Trump's Republican Party failed to agree with opposition Democrats on a way forward on a spending bill. This, in turn, drags the USD lower against the JPY. Additionally, the downbeat US economic data undermines the Greenback as the ADP National Employment report showed private payrolls declined by 32,000 in September, boosting expectations that the Federal Reserve (Fed) will cut interest rates two more times this year.
Markets expect a 25 basis points (bps) cut at the Fed’s October meeting and are currently pricing in a 90% chance of an additional reduction in December, according to the CME FedWatch Tool.
On the other hand, political uncertainty in Japan could weigh on the Japanese Yen (JPY) and create a tailwind for the pair. The ruling Liberal Democratic Party (LDP) prepares to elect its new leader this weekend. The new Prime Minister will influence the trajectory of Japan's fiscal policy, which could further determine the Bank of Japan's (BoJ) policy stance and drive the JPY in the near term.
Source: Fxstreet
