USD/JPY rises near 148.00 as calm market sentiment weighs on yen’s appeal

• USD/JPY rises to near 148.00 as a draw for the Japanese yen as the safe haven has declined.
• US inflation data will influence market speculation for a Fed rate cut in September.
• Investors see the US headline and core PPI rising at a slower pace, both monthly and annually.

USD/JPY reaches near 148.00 in the European session on Tuesday. The asset gains as the Japanese yen (JPY) weakens on a sharp decline in safe-haven flows. Investor appetite for risk assets improved as fears of a potential recession in the United States (US) eased significantly.

Concerns about the slowdown in the US driven by the weak non-farm payrolls (NFP) report for July. However, a drop in initial jobless claims for the week ended August 2 suggested that labor market conditions are not as bad as expected.

Meanwhile, market sentiment is upbeat with July’s US Consumer Price Index (CPI) on the horizon. S&P 500 futures posted decent gains in the European session. The US Dollar Index (DXY), which tracks the value of the greenback against six major currencies, holds the key support level of 103.00. US 10-year Treasury yields climb to near 3.91%.

The US CPI is expected to influence market speculation for interest rate cuts by the Federal Reserve (Fed) this year. Financial markets are currently expecting the Fed to start cutting interest rates at the September meeting. However, traders are divided on the size of the rate cut. The CME FedWatch tool shows that the probability of a 50 basis point (bp) rate cut is 49.5%.

In today’s session, investors will focus on US producer price index (PPI) data for July, which will be released at 12:30 GMT. Economists expect the monthly PPI to be flat last month. While the core PPI, which excludes volatile food and energy prices, rose at a slower pace of 0.2 percent from the previous release of 0.4 percent. The annual value and core PPI are estimated to have decelerated by three-tenths to 2.3% and 2.7% respectively.