• USD/JPY gains sharply to near 155.50 as the US Dollar recovers strongly, following the US NFP data release.
• Investors believe that the US data was distorted by the government shutdown.
• The BoJ is expected to hike interest rates by 25 bps to 0.75%.

The USD/JPY pair gains 0.55% and jumps higher to near 155.50 during the European trading session on Wednesday. The pair strengthens as the US Dollar (USD) outperforms its peers, following the release of the United States (US) Nonfarm Payrolls (NFP) report for October and November.

During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.4% higher to near 98.60.

The US Dollar trades higher as weak US employment data failed to influence market expectations for the Federal Reserve’s (Fed) monetary policy outlook. Fed’s interest rate expectations remain steady as market participants believe that the labour market data was distorted by the US government shutdown. The data showed on Tuesday that the Unemployment Rate jumped to 4.6% in November.

Going forward, investors will focus on the US Consumer Price Index (CPI) data for November, which will be released on Thursday. Both the headline and the core CPI are expected to have grown at an annualized pace of 3%.

Meanwhile, the Japanese Yen (JPY) trades cautiously ahead of the Bank of Japan’s (BoJ) monetary policy announcement on Friday. The BoJ is widely expected to raise interest rates by 25 basis points (bps) to 0.75%. BoJ’s hawkish expectations are backed by the recent shift in rhetoric from Governor Kazuo Ueda, who reiterated last week that the likelihood of the “central bank's baseline economic and price outlook materializing had been gradually increasing”. Ueda added that the central bank is “getting closer to attaining its inflation target”.