USD/JPY appreciates towards 143.00 as traders expect the Fed to cut interest rates.

• USD/JPY is gaining ground as the chances of a smaller rate cut by the Fed in September increase.
• BoJ board member Naoki Tamura said there was no predetermined plan on the pace of future rate hikes.
• The CME FedWatch tool suggests the odds of a 50 bps rate cut by the Fed have fallen to 15.0%.

USD/JPY snaps its two-day losing streak, trading around 142.90 during European hours on Thursday. The Japanese yen (JPY) remains weak following remarks from Bank of Japan (BoJ) board member Naoki Tamura.

BoJ board member Tamura said “there is no preconceived idea of ​​the pace of further rate hikes.” Unlike the US and Europe, rate hikes in Japan are expected to occur more gradually. Exactly when short-term rates in Japan might reach 1% will depend on economic and price conditions at that time.

Read the full article: BoJ’s Tamura has no preconceived idea about pace of further rate hikes

The upside in USD/JPY could be attributed to rising expectations of a smaller interest rate cut by the Fed in September. US consumer price index (CPI) data for August showed that headline inflation fell to a three-year low. This development has increased the likelihood that the Federal Reserve (Fed) will begin its easing cycle with a 25 basis point interest rate cut in September.

The US consumer price index fell to 2.5% from a year earlier in August, from the previous reading of 2.9%. The index fell below the expected value of 2.6%. Meanwhile, headline CPI was 0.2% on the month. Core CPI excluding food and energy, was unchanged at 3.2% year-on-year. On a monthly basis, the core CPI rose to 0.3% from the previous reading of 0.2%.

According to the CME FedWatch tool, markets fully anticipate a rate cut of at least 25 basis points (bps) by the Federal Reserve at its September meeting. The probability of a 50 bps rate cut fell sharply to 15.0%, down from 44.0% a week ago.