USD/JPY Nears One-Year Highs as Fed Rate-Cut Bets Fade

Markets recalibrate as the US Dollar strengthens amid mixed economic signals.


The US Dollar continued its upward momentum against the Japanese Yen on Friday, with USD/JPY reaching levels not seen since January 2025. The pair is trading around 158.00, marking a fourth consecutive day of gains and positioning itself for a second straight weekly advance.


Mixed Jobs Data Paints a Nuanced Economic Picture

Recent US economic releases offered a blend of signals. Job growth slowed in December, with the economy adding fewer positions than expected. Yet the unemployment rate fell, signaling continued resilience in the labor market. Wages showed steady growth, keeping consumers’ purchasing power intact.


Meanwhile, consumer sentiment rose to its highest level since September 2025, reflecting optimism among Americans despite ongoing economic uncertainties. Inflation expectations also remained elevated, hinting that price pressures are far from easing.


The Fed Holds Its Cards Close

Taken together, these mixed signals have tempered expectations for near-term Federal Reserve rate cuts. While markets still price in the possibility of a couple of reductions this year, traders now largely anticipate no changes at the upcoming January Fed meeting. Attention is shifting to the commentary from Fed officials, which could provide further hints on the central bank’s future moves.


What This Means for USD/JPY


The combination of a strong labor market, steady wages, and resilient consumer sentiment is giving the US Dollar solid footing. For USD/JPY traders, this suggests continued upward pressure in the near term, especially as rate-cut expectations ease and the Fed maintains a cautious stance.