USD/JPY strives to reclaim 145.00 as traders pare Fed large rate cut bets

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

Market sentiment is cautious as traders rollback bets supporting another large interest rate cut from 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 Greenback’s value against six major currencies, climbs to near 101.00.

The Fed started its rate-cut cycle with a decline in interest rates by 50 basis points (bps) to 4.75%-5.00% last month. Market participants were anticipating the Fed to continue with an aggressive policy easing stance to prevent further deterioration in job growth.

However, the comments from Fed Chair Jerome Powell on Monday suggested that policymakers are not in rush for reducing interest rates quickly. Powell said that he sees interest rates further declining by 50 bps by the year-end, which indicates that there will be two 25 bps rate cuts in each of the remaining two meetings this year.

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