USD/JPY recovers to near 147.90 ahead of US employment figures

• USD/JPY recovers intraday losses ahead of US employment data on Friday.
• US Dollar gains ground on market sentiment around Fed rate cuts in June.
• US Nonfarm Payrolls could fall to 200K new jobs in February, lower than the previous figure of 353K.

USD/JPY trims some of its intraday losses on Friday on improved US Dollar (USD) amidst weaker US Treasury yields. Nonetheless, the pair remains in negative territory and continues the losing streak for the fourth successive day, trading around 147.90 during the European trading hours.

The weekly depreciation of the US Dollar against the Japanese Yen is around 1.50%, by the press time, which can be attributed to the positive sentiment surrounding expectations of the Federal Reserve (Fed) initiating a rate-cut cycle starting in June. The CME FedWatch Tool indicates a 56.7% probability of a 25 basis point rate cut in June. Additionally, Federal Reserve Chair Jerome Powell hinted at the possibility of interest rate cuts occurring sometime this year during his second day of testimony before the US Congress.

Additionally, Cleveland Fed President Loretta Mester spoke at the Virtual European Economics and Financial Center, stating apprehension regarding the potential persistence of inflation throughout the year. Mester mentioned that if economic conditions align with forecasts, there may be a probability of rate cuts later in 2024.

The Japanese Yen (JPY) experiences a boost in response to growing speculation that the Bank of Japan (BoJ) will depart from its ultra-loose monetary policy stance, thereby weakening the USD/JPY pair. BoJ Governor Kazuo Ueda mentioned that it is "fully possible to seek an exit from stimulus while striving to achieve the 2% inflation target."

BoJ Governor Ueda also stated that the extent of rate hikes would depend on the prevailing circumstances if negative rates are lifted. Furthermore, BoJ policy board member Junko Nakagawa highlighted that the likelihood of achieving the 2% inflation target sustainably is gradually improving.

In January, Japan's non-seasonally adjusted Current Account Surplus decreased to ¥438.2B, from the previous figure of ¥744.3B. However, the surplus exceeded expectations, reaching ¥330.4B. This outcome could potentially provide some support for the Japanese Yen. Meanwhile, traders are eagerly anticipating US employment data, which includes Average Hourly Earnings and Nonfarm Payrolls, to gain further insights into the economic situation in the United States.