• US unemployment claims rise to three-month high
• Japanese yen strengthens

The Japanese yen is in positive territory on Thursday. In the North American session, USD/JPY is trading at 151.60, down 0.47%.

US unemployment claims jump

US initial unemployment claims rose to 231,000 on the week ending November 11th, up from 218,000 a week earlier. This was the highest level in almost three months and above the consensus estimate of 220,000. The data is further evidence of cracks in the US labor market, as elevated interest rates are making themselves felt throughout the economy. Job growth declined in October and the unemployment rate has climbed to 3.9%, the highest since January 2022.

The jump in claims follows soft producer prices and retail sales reports. In the US, producer prices fell 0.5% m/m in October, its largest drop since April 2020 and below expectations. The decline in gasoline prices was a major factor in the soft release. Retail sales for October dipped 0.1%, missing the estimate of 0.3% and snapping a six-month streak of gains.

The Fed has tried to stick to a hawkish message, insisting that rate hikes remain on the table. With inflation still well above the 2% target, Fed policy makers are not discussing rate cuts. The markets, however, widely expect a pause at the December meeting and have priced in a rate cut in May 2024, compared to July 2024 just last week. If US data continues to miss expectations, we could see the markets again bring forward the timing of a rate cut.

Is the Bank of Japan shifting its ultra-loose policy? Traditionally, the central bank is cagey about its intentions, but Governor Ueda has been sounding less dovish lately. Ueda has insisted for months that the BoJ will not tighten until wage growth strengthens, but last week he noted that the BoJ could exit easy policy even if wages don’t rise. That could be a signal that the BoJ is considering ending negative interest rates in the near term. Any shift in policy is likely to occur slowly, as Japan’s economy remains weak and ending negative rates could have a massive effect on the financial markets and on the Japanese yen.

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USD/JPY Technical

• USD/JPY is testing support at 150.82. Below, there is support at 150.05
• There is resistance at 151.86 and 152.51

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