Today’s Market Outlook
October 2, 2026
Yen buying leads ahead of U.S. jobs report as stronger Tokyo CPI and lower oil weigh on USD/JPY
■ Market overview
The dollar’s rise and the yen’s weakness are being corrected ahead of the U.S. employment report.
Tokyo’s core CPI rose to 2.7%, above market expectations, reviving expectations for further BOJ rate hikes. The unwinding of yen-short positions built up the previous day has added to the pressure, leaving USD/JPY and the cross-yen pairs struggling to gain ground.
Early in the London session, USD/JPY fell to 157.48. At the same time, NYMEX crude dropped from below $92 to the upper $89s, adding to dollar selling and yen buying.
Position adjustment is likely to dominate the rest of the European session, while the U.S. employment report is likely to determine direction in New York.
■ USD/JPY
Two factors are weighing on USD/JPY: renewed expectations for further BOJ rate hikes and falling oil prices.
The stronger-than-expected Tokyo CPI has prompted the market to reconsider expectations for consecutive BOJ rate hikes, which had faded the previous day. However, this report alone will not determine the timing of a rate hike. Whether yen buying can persist will also depend on the outlook for policy.
Lower oil prices ease U.S. inflation concerns and safe-haven demand for the dollar, while also reducing concerns about Japan’s deteriorating terms of trade. For now, this combination is weighing on USD/JPY.
The immediate focus is whether the pair can hold around the London low of 157.48. A clear break below that level could put 157.00 in view. If the pair rebounds, recovery above 158.00 would be one indication that the broader dollar uptrend is resuming.
■ U.S. employment report
The main event today is the September U.S. employment report.
Market expectations are as follows:
• Nonfarm payrolls: +90,000, compared with +162,000 previously
• Unemployment rate: 4.1%, unchanged
• Average hourly earnings: +0.3% month over month, unchanged
• Average hourly earnings: +3.1% year over year, unchanged
The forecast points to slower job growth, with the unemployment rate and wages unchanged.
If payrolls exceed expectations and wage growth is also strong, expectations for further rate hikes may rise, supporting U.S. yields and the dollar. USD/JPY could recover its pre-report losses.
Conversely, if payrolls fall short and the unemployment rate rises or wage growth slows, expectations for further U.S. rate hikes may recede, extending the decline in USD/JPY.
■ How to assess the market’s reaction after the release
The initial reaction is likely to focus on payrolls, but subsequent trading will depend on revisions to previous figures, the unemployment rate, and average hourly earnings.
For example, if payrolls are strong but previous months are revised sharply lower, the initial dollar buying may not last. If payrolls are weak but wages are stronger than expected, conflicting signals on growth and inflation could lead to volatile trading.
Watch whether U.S. Treasury yields move in the same direction as the initial currency-market reaction. If the dollar rises but U.S. yields do not, the durability of the move should be treated with caution.
Position adjustment ahead of the weekend may calm trading, but a result that significantly diverges from expectations could keep the market moving in one direction through the end of the New York session.
■ Euro and cross-yen pairs
The euro area’s preliminary September HICP reading is in focus.
An upside surprise in inflation could support expectations for tighter ECB policy and prompt euro buying. A weak reading, on the other hand, could cap the euro.
Cross-yen pairs are under pressure from renewed expectations for BOJ rate hikes and the unwinding of yen-short positions. Even if EUR/USD or GBP/USD rebounds, strong yen buying could limit gains in the cross-yen pairs.
After the U.S. employment report, watch the reaction in European and U.S. equities as well as in USD/JPY. If equities fall sharply, yen buying could intensify, with the dollar and yen both strengthening at the same time.
■ Other factors
The U.S. calendar includes factory orders and final durable goods orders. Brazil will release industrial production data.
Several ECB officials are also scheduled to speak, including French central bank Governor Moulin, ECB Executive Board member Cipollone, ECB Vice President Vujčić, and Bundesbank President Nagel. In the United States, Dallas Fed President Logan is scheduled to deliver opening remarks at a conference.
However, the U.S. employment report is likely to have the greatest market impact today, and reactions to other events may be limited.
■ Key points for overseas markets
• Can USD/JPY find support around 157.48?
• Can the pair recover above 158.00 during a rebound?
• How far will payrolls deviate from the forecast of 90,000?
• What will revisions to previous data and average hourly earnings show?
• Will U.S. yields confirm the currency market’s initial reaction?
• Will oil fall further from the upper $89s?
• What will euro-area HICP show, and how do ECB officials view inflation?
• Will position adjustment ahead of the weekend alter the post-report move?
Today, USD/JPY has been testing lower levels, with the stronger Tokyo CPI and falling oil prices contributing to the pressure. Whether this correction proves temporary or yen strength continues will depend on the U.S. employment report and the subsequent reaction in U.S. yields.
