US Futures Hold Firm as BoJ Rate Hike Risks Fade

How Did Tokyo Inflation and Japanese Wage Data Move US Futures?

Tokyo inflation and Japanese wage data sink bets on an October Bank of Japan rate hike, easing risks of a yen carry trade unwind.

The so-called ‘core-core’ inflation rate dropped from 3% in August to 2.5% in September, while headline inflation remained at 2.5%. Economists expected the ‘core-core’ inflation rate to rise to 3.3%.

Wage data offered the BoJ further reasons to delay lifting interest rates. Real wages fell 0.2% in July, contracting for the seventh consecutive month. Softer wages may curb consumer spending, dampening demand-driven inflation.

The ‘core-core’ inflation drop toward the BoJ’s 2% target and falling real wages could push back a BoJ rate hike to December or potentially January, easing demand for the yen.

The USD/JPY pair sat at 149.786 in early trading, holding onto the previous session’s 0.60% gain. US stock futures got early support before retreating as US trade headlines weighed on sentiment.

How Did Trump’s Tariff Announcement Impact Market Sentiment?

President Trump’s latest tariff announcement shifted focus away from Japan’s weaker inflation and wage trends. Trump announced plans for 100% levies on branded drugs made outside of the US, a 50% duty on kitchen cabinets, and a 25% tariff on heavy-duty trucks. Upholstered furniture and bathroom vanities were also in the firing line, with the tariffs taking effect on October 1.

Could the US-Japan Rate Differential Drive USD/JPY Higher?

The tariff announcement followed upbeat US economic data from Thursday that suggested a less dovish Fed rate path, pressuring US stock futures. Notably, a delay to BoJ rate hikes and a slower pace of Fed rate cuts could widen the US-Japan rate differential, favoring the US dollar. A wider rate differential could send USD/JPY higher, further reducing the threat of a yen carry trade unwind-driven market sell-off.

The combined effects of the reduced risks of a carry trade unwind, Trump’s tariff announcements, and fading bets on aggressive Fed rate cuts left US stock futures relatively steady in early trading.

How Are US Stock Futures Reacting Ahead of Key Data?

US stock futures posted mixed performances in morning trading on Friday, September 26. The Dow Jones E-mini gained 9 points, while the Nasdaq 100 E-mini and the S&P 500 E-mini dropped 29 points and 2 points, respectively.

US stock futures extended their losing streak to three sessions on Thursday, September 25, as US GDP and labor market data signaled a resilient economy.

What to Expect from the US Personal Income and Outlays Report

Later Friday, the Personal Income and Outlays report will face scrutiny amid fading expectations of multiple Fed rate cuts in the fourth quarter. Economists expect the Core PCE Price Index to rise 2.9% year-on-year in August, matching July’s increase.

If PCE beats expectations, here’s how futures could react intraday. A higher reading could reduce bets on fourth-quarter Fed rate cuts, pressuring risk assets. For context, the Nasdaq 100 slid 1.29% on August 29 in response to a hotter-than-expected Personal Income and Outlays report for July.

Conversely, a softer print may revive hopes for aggressive Fed rate cuts, lifting sentiment.

Beyond the data, traders should closely monitor FOMC members’ speeches. Reaction to the inflation data could influence risk appetite late in the session.

Key Technical Levels for Dow Jones, Nasdaq 100, and S&P 500

Despite three consecutive days of losses through Thursday, September 25, US stock futures remained above the 50-day and 200-day Exponential Moving Averages (EMAs), reaffirming a short-term bullish bias.

However, the near-term outlook hinges on the Personal Income & Outlays Report, FOMC members’ speeches, trade developments, and the BoJ’s forward guidance. For traders, here are the key levels driving market trends.

Dow Jones

• Resistance: 46,500 and the September 23 record high of 47,055.
• Support: 46,000 and then the 50-day EMA (45,344).

Nasdaq 100

• Resistance: September 22 record high of 25,027 and 25,250.
• Support: 24,500, 24,000, and the 50-day EMA (23,747).

S&P 500

• Resistance: September 22 record high of 6,757 and then 7,000.
• Support: 6,500 and the 50-day EMA (6,483).

Why the September 26 Session Is Crucial for Market Direction

Traders should continue to monitor the Bank of Japan’s monetary policy cues and USD/JPY trends. However, later in the session, the Personal Income and Outlays report will be the main event.

Soft inflation numbers could cement September’s US stock market gains, while a sharp rise may reverse the monthly gains, underscoring the significance of today’s inflation report.

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