Fed rate cut keeps a bearish bias around USD/JPY | 24 September 2024

USDJPY:

The USD/JPY currency pair is trading with slight losses near 143.55 in the early Asian session on Tuesday. The decline in the US dollar (USD) is continuing to exert downward pressure on the pair. Later in the day, the US Consumer Confidence Index data for September is scheduled for release, followed by a speech from Federal Reserve (Fed) Governor Michelle Bowman.

The Federal Reserve's decision to cut interest rates by 50 basis points last week was widely anticipated, although the extent of the cut came as somewhat of a surprise. On Monday, Minneapolis FRB President Neel Kashkari stated that he anticipates another interest rate cut in 2024. However, Mr. Kashkari anticipates that future reductions will be less significant than those implemented at the September meeting.

Chicago Fed President Austan Goolsbee stated that further interest rate cuts are likely to be required next year, with rates expected to fall significantly. Furthermore, Atlanta Fed President Rafael Bostic stated on Monday that the US economy is approaching normal inflation and unemployment rates, and that the central bank must also "normalise" monetary policy. The US dollar is facing continued pressure as market expectations grow for further interest rate cuts from the Fed in the remainder of the 2024 period.

However, the speculation that the Bank of Japan (BoJ) is in no hurry to raise interest rates could limit the Japanese Yen (JPY)'s gains. The BoJ maintained the current interest rates last week, as the policymakers require additional time to evaluate the optimal timing for an increase in borrowing costs. Mr Ueda's remarks have prompted some market participants to reconsider the timing of the next rate hike, with some now expecting it to be delayed until early next year, according to Tomoichiro Kubota, senior market analyst at Matsui Securities Co.

Meanwhile, rising geopolitical tensions in the Middle East could result in increased safe-haven flows, which would favour the yen. The Bloomberg news agency reported early Tuesday that Israel had carried out airstrikes on targets in southern Lebanon, resulting in the deaths of nearly 500 people and marking one of the bloodiest days of fighting in two decades. This has fuelled fears about the possibility of all-out conflict.

Trade recommendation: Trading mainly by Sell orders from the current price level.

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