The Japanese yen rose in Asian trade on Friday against major rivals, expanding gains for the fifth straight session against the US dollar and hitting a two-month high, and on track for the largest weekly profit in 2025 on strong investment. 

Earlier Japanese data showed strength in wages and consumer spending, adding to bullish remarks from BOJ officials, which bolstered the case for a Japanese rate hike in March.

The Price

The USD/JPY fell 0.3% today to 150.95 yen per dollar, the lowest since December 10, with a session-high at 151.59.

The yen rose 0.8% on Thursday against the dollar, marking the fourth profit in a row.

Weekly Trades

The yen is up 2.7% so far this week against the dollar, on track for the fourth weekly profit in a row, and the largest since November 2024.

Strong Data

Official data showed Japan’s full time wages rose 4.8% y/y in December, the best rate since December 2022, and beating estimates of a 3.6% rise.

Japan’s household spending rose 2.7% y/y in December, also the best since late 2022, and hugely beating estimates of a 0.5% rise.

The rise in both wages and household spending would accelerate inflationary pressures in the economy, which would prompt the Bank of Japan policymakers to hike rates quickly this year.

Bullish Remarks 

BOJ member Naoki Tamura said on Wednesday that hiking rates to 1% is necessary by the second half of the 2025 financial year to combat inflation due to higher commodity and labor costs.

Japanese Rates

Following the wages data, the odds of a BOJ rate hike in March rose from 50% to 60%.

Investors expect 50 basis points of BOJ interest rate hikes overall this year. 

Most US stock indices, excluding the Dow, gained ground on Thursday ahead of the US payrolls report. 

Earlier US data showed unemployment claims rose 11 thousand to 219 thousand last week, beating estimates of 213 thousand.

Tomorrow, the US payrolls report will be released, expected to show the addition of 170 thousand new jobs in January.

Dow Jones closed down 0.3%, or 125 points to 44,747 points, with a session-low at 44,545.

S&P 500 rose 0.3%, or 22 points to 6083 points, with a session-high at 6084.

NASDAQ climbed 0.5%, or 100 points to 19,792 points, with a session-low at 19,654 points.

Sterling fell against most major rivals on Thursday after the Bank of England’s policy decisions, and after statements by Governor Andrew Bailey.

The BOE decided to cut interest rates by 25 basis points to 4.5% amid concerns about UK growth.

The bank noted that consumer prices slowed down 2.5% in the fourth quarter of 2024, but inflation overall remains high.

Higher global energy costs are expected to raise UK inflation to 3.7% in the third quarter of this year.

The BOE also expects UK growth at just 0.75% in 2025, down by half from recent November estimates.

Bailey has commented on the weak UK economic growth in the short term, before it’s expected to return to solid growth by mid 2025, noting that cloudiness of the global economic outlook due to trade tensions.

On trading, the GBP/USD pair fell 0.5% as of 20:02 GMT to $1.2436.

Aussie

The AUD/USD pair was little changed today at 0.6283.

US Dollar

The dollar index rose 0.1% as of 19:53 GMT to 107.6, with a session-high at 108.1, and a low at 107.5.

Earlier US data showed unemployment claims rose 11 thousand to 219 thousand last week, beating estimates of 213 thousand.

Tomorrow, the US payrolls report will be released, expected to show the addition of 170 thousand new jobs in January.

Sterling declined in European trade on Thursday for the first time in four sessions against the dollar, giving up four-week highs on profit-taking and risk aversion before the Bank of England’s policy decisions.

The BOE is widely expected to cut interest rates by 25 basis points for the third time since the starting the latest cycle of policy easing. 

After the expected cut, the UK-US interest rate gap will disappear, with traders then looking for more clues on both sides of the pond to estimate the projected path forward. 

The Price

The GBP/USD pair fell 0.2% today to $1.2483, with a session-high at $1.2510.

The pair rose 0.2% yesterday, marking the third profit in a row, with a four-week high at $1.2550 as trade concerns calmed down.

BOE

The Bank of England is widely expected to cut interest rates by 25 basis points to 4.5%, the lowest since May 2023, as inflation calmed down recently.

It would be the third such rate cut since starting the current cycle of policy easing in August 2024.

The current odds of a 0.25% BOE rate cut stand at a solid 99%.

UK interest rate futures estimate 65 basis points of total BOE rate cuts by the end of 2025.

Rate Gap

Following the BOE’s meeting today, the current 0.25% US-UK rate gap will likely vanish, which means future movements for the GBP/USD pair will depend on evidence for upcoming monetary policy decisions in the US and the UK.