A pickup in service sector activity would likely raise investor expectations of a near-term interest rate hike. However, investors must consider the sub-components, including employment, prices, and new orders.

Following the March rate hikes, a translation into higher input prices, a more marked job creation rate, and rising new orders need consideration. Upward trends could incentivize the BoJ to begin rate hike discussions. The Bank of Japan will deliver its monetary policy decision on Friday, April 26.

Economists expect the Bank of Japan to leave interest rates at zero percent. Nevertheless, Bank of Japan Governor Kazuo Ueda may refer to the PMIs during the press conference.

US Economic Calendar: Services PMI and the Fed

On Tuesday, preliminary US private sector PMIs will garner investor interest amidst fading investor bets on multiple 2024 Fed rate cuts.

The Services PMI will likely affect the USD/JPY more, accounting for over 70% of the US economy. The services sector is a significant contributor to inflation. Chicago Fed President Austan Gooslbee recently highlighted the housing services sector as a stumbling block to returning inflation to target.

Economists forecast the S&P Global Services PMI to slip from 53.1 to 53.0 in April. An unexpected rise in the Services PMI could further impact investor expectations of a September Fed rate cut. However, investors must consider the sub-components, including prices and employment.