USD/JPY treads water below 148.50 amid a moderate risk aversion 

• The US Dollar's recovery against the Yen has lost steam at 148.50, with all eyes on Ukraine's summit.
• USD/JPY is lacking a clear bias, with market volatility subdued.
• Higher hopes of further BoJ tightening have created a JPY-supportive monetary policy divergence.

The US Dollar bounced up against the Japanese Yen on Friday, but upside attempts have been capped below 148.50 on Monday, with trading volumes at low levels, as investors await the outcome of a meeting between Trump and Zelenskyy in Washington.

Markets are showing a cautious tone, concerned about a likely failure at the summit, where Trump is expected to pressure his Ukrainian counterpart to accept most of the conditions set by Putin on Friday. Zelenskyy, who will be backed by other European leaders, has considered giving up territories as a red line, which is unlikely to be crossed today.

The macroeconomic calendar is thin today, and traders keep an eye on the US Jackson Hole Symposium in the second half of the week. The highlight will be Fed Powell's speech on Friday, which will be carefully watched to see whether the recent signs of the softening labour market have prompted him to tone down his hawkish rhetoric.

In Japan, the BoJ has paid little attention to the odd comment from US Treasury Secretary Scott Besent, stating that the bank might be "behind the curve with interest rates. Nevertheless, the strong Japanese GDP and Industrial Product figures seen last week have boosted hopes that the bank might hike rates further in the coming months. This us creating a JPY-supportive monetary policy divergence