USD/JPY struggles to regain 145.00 as traders reduce bets on big Fed rate cut

• USD/JPY looks to reclaim 145.00 as Fed’s Powell squashes big rate cut bets for November.
• US Dollar bounces ahead of key US data
• The absence of immediate plans for further rate hikes in the BoJ SOP weighed on the Japanese Yen.

The USD/JPY pair gains strength to extend its rise towards the crucial resistance of 145.00 in the European session on Tuesday. The asset sees strong buying interest as the US Dollar (USD) rises further amid uncertainty ahead of the United States (US) Purchasing Managers’ Index (PMI) and labor market data September this week, which will indicate whether the risks of an economic slowdown remain.

Market sentiment is cautious as traders back off bets supporting another big interest rate cut by the Federal Reserve (Fed) in November. S&P 500 futures have posted some losses in European trading hours. The US Dollar Index (DXY), which tracks the value of the Dollar against six major currencies, rises near 101.00.

The Fed began its rate cut cycle by lowering interest rates by 50 basis points (bps) to 4.75%-5.00% last month. Market participants anticipated the Fed to continue an aggressive policy easing stance to prevent a further deterioration in employment growth.

However, comments from Fed Chair Jerome Powell on Monday suggested that policymakers are in no rush to cut interest rates quickly. Powell said he sees interest rates declining further by 50 bps by the end of the year, indicating there will be two 25 bp rate cuts at each of the two remaining meetings this year.

On the Tokyo front, the Japanese Yen (JPY) weakens as the Bank of Japan’s (BoJ) Summary of Opinions (SOP) from the monetary policy meeting that took place on September 19 indicated that officials have no plans immediate measures to further tighten interest rates. The BoJ intends to maintain its accommodative stance but remains open to adjustments if economic conditions show significant improvement, the BoJ SOP showed.