US nonfarm payrolls rebounded in August, with 162,000 jobs added, the best reading in five months, while the June and July total was revised up by 55,000. July’s revised 21,000 was still below the roughly 70,000 pace associated with population trends, and unemployment held at 4.1%, slightly lower than earlier in the year. The dollar’s immediate reaction was restrained as markets focused on US inflation due on 11 September; early estimates pointed to core CPI holding at 3.4%. Rate pricing remained tilted towards a single Fed move, with CME FedWatch putting the probability of a hike on 16 September at about 60%, and expectations for end-2026 largely unchanged, with 37% looking for two hikes.
GBPUSD slipped after the release, while attention in the UK also turned to gilt markets, after 10-year yields rose above 5.25% on 1 September, a 19-year high. USDJPY stayed under pressure after declines on 2 and 3 September, as speculation grew about support for the yen; near-term levels cited included support around ¥155, potential resistance near ¥160, and downside risk towards February lows close to ¥152 if intervention were confirmed. Volumes in CFDs rose sharply from 2 September, before profit-taking following the 4 September data, leaving the 11 September inflation print as the next focal point.
US Jobs, Fed Rate Path, and Inflation Outlook
Following the surprisingly strong nonfarm payrolls release of 162,000, we believe derivative traders should prepare for heightened volatility ahead of the US inflation data on September 11. Although the dollar’s initial reaction was quiet, the solid jobs report and upward revisions of 55,000 for previous months suggest the US economy is resilient. We recommend closely watching the CME FedWatch Tool, which currently prices in a 60% chance of a rate hike on September 16.
The upcoming core inflation reading, estimated to hold at 3.4%, will be the next major market mover for dollar-based pairs. We must also account for rising energy costs, as Brent crude oil has climbed significantly since early August, which historically acts as a strong driver of consumer price pressures. Given these factors, we suggest positioning for potential upside surprises in inflation that could solidify the Federal Reserve’s hawkish stance.
GBP/USD and USD/JPY Trading Strategies
For GBP/USD, we advise traders to look for short-term selling opportunities on any temporary bounces toward the 20-day Simple Moving Average around $1.356. The pound remains under pressure as UK 10-year gilt yields recently hit a fresh 19-year high above 5.25% on September 1, reflecting bond market nervousness ahead of the late October budget. If the immediate 50-day SMA support fails, we anticipate a decline toward the value area between the 100 and 200 SMAs.
In the USD/JPY market, we urge extreme caution as traders weigh the high probability of another Bank of Japan intervention, similar to their record 9.8 trillion yen ($62 billion) defensive actions seen in previous currency crises. While a hawkish Bank of Japan could hike rates on September 18, the currency pair is currently testing crucial support near the ¥155 level. If Japanese authorities remain on the sidelines, we could see a gradual recovery back toward the static resistance level of ¥160.
