USDJPY gains ground on growing probabilities of a lower Fed rate cut in September.
USDJPY ends a two-day losing streak, trading at 142.90 during European hours on Thursday. The Japanese yen (JPY) remains depressed following remarks by the Bank of Japan’s (BoJ) board member. Naoki Tamura.
Naoki Tamura, a BoJ board member, remarked that there is no predetermined plan for the pace of future rate hikes.
Tamura, a board member of the Bank of Japan, remarked that “there is no predetermined pace of further rate hikes.” Unlike the United States and Europe, Japan’s rate hikes are projected to be more gradual. The exact date of when Japan’s short-term interest rates may hit 1% will be determined by the current economic and price conditions.
The rise in the USDJPY pair could be attributable to increased expectations of a lesser interest rate drop by the Fed in September. The August US Consumer Price Index (CPI) statistics indicated that headline inflation fell to a three-year low. This development has raised the possibility that the Federal Reserve The Federal Reserve will begin its easing cycle with a 25-basis-point interest rate drop in September.
In August, the US Consumer Price Index fell to 2.5% year on year, down from 2.9% the month before. The index fell below the projected 2.6% reading. Meanwhile, the headline CPI was up 0.2% month on month. Core CPI excluding Food and Energy stayed constant at 3.2% year on year. On a monthly basis, core CPI increased to 0.3% from 0.2% previously.
The probability of the Fed cutting interest rates by 50 basis points have fallen to 15.0%.
According to the CME FedWatch Tool, markets fully expect the Federal Reserve to decrease interest rates by at least 25 basis points (bps) at its meeting in September. The possibility of a 50 basis point rate cut has dropped dramatically to 15.0%, down from 44.0% a week earlier.
