Investors should keep a close eye on the inflation data as the Fed begins to reduce bonds purchases.
The full employment target grows closer, and the figures released on Friday were robust enough to suggest a change in the Fed's monetary policy.
The non-farm payroll data beat forecasts with 531k new jobs, well above expectations, and the unemployment rate dropped to 4.6%. Although the participation ratio remained at 61.6%, it was still low, and President Powell addressed it in the statements after the Fed meeting. On the other hand, the average hourly earnings followed the rise with 4.9%, a high number that indicates wage pressures, one of the factors to consider for the evolution of inflation.
However, the latest statement made by the Fed does not show any concern about this inflationary upsurge, still considering it a transitory phase, with no need to raise the interest rates.
By contrast, bond yields fell sharply along the curve with a T-note at 1.455%, reversing back to end-September levels.
This movement was caused by the weakening of the US dollar, which is visible in the USD/JPY pair, highly correlated with bond yields.
The pair retreated to the area near the 113.24 support, moving away from the 114.58 resistance that has not been overcome since the first approach in mid-October.