In Tuesday's early Asian session, the USD/JPY is trading around 145.40, up 0.83% for the day. However, concerns over a potential US economic downturn continue to pressure the pair.
The USD/JPY pair is attempting to regain some lost ground near 145.40 after dipping to its lowest level since January 2 at 141.68 earlier in the session. The recent decline in the Greenback has been driven by fears of a US recession and expectations of significant rate cuts by the Federal Reserve (Fed).
On Friday, US employment data revealed an increase in the Unemployment Rate for July, intensifying fears of a looming recession. The markets anticipate that the Fed will implement a 50 basis point (bps) rate cut in both September and November, followed by another quarter-point cut in December.
According to LSEG data, Fed fund futures show a nearly 99% probability of a 50 bps cut at the September meeting. These expectations for more aggressive Fed rate cuts are putting downward pressure on the US Dollar (USD) across the board.
Chicago Fed President Austan Goolsbee mentioned on Monday that the Fed is prepared to respond if economic or financial conditions worsen. Meanwhile, San Francisco Fed President Mary Daly stated that the central bank is closely monitoring labor market trends and will act as necessary based on forthcoming data.
Conversely, the Japanese Yen (JPY) is gaining strength as traders unwind carry trades. Additionally, the prospect of further monetary policy tightening by the Bank of Japan (BoJ) following last week's rate increase may support the JPY in the near future.
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