The USD/JPY pair experienced a sharp decline to nearly 134.40 during the Asian session, following neutral interest rate guidance from the Federal Reserve (Fed) after a widely anticipated 25 basis point (bp) rate hike. However, the asset has since stabilized and is trading within an intermediate cushion. 

The S&P500 futures have also recovered some losses, indicating that investors are digesting the uncertainty surrounding the Fed’s roadmap for addressing US inflation. Nevertheless, the overall market mood appears divided as risk-perceived currencies continue to attract bids while US equities face pressure.

Additionally, US banking woes have been renewed after PacWest Bancorp came under pressure, with its shares dropping by over 50% in the post-market. This development has raised concerns among investors about the bank’s situation, and Bloomberg has reported that the bank is considering strategic options, including a potential sale. 

It is important to note that Japanese markets are closed for Greenery Day.

The US Dollar Index (DXY) has declined to around 101.20 due to the neutral Fed guidance, US banking jitters, and concerns about the US debt ceiling. The delay in increasing the debt ceiling could result in the US Treasury missing timely payments. 

The US Automatic Data Processing (ADP) agency has reported an addition of 296K jobs in April, surpassing the estimates of 150K and the former release of 145K, indicating a tight labor market in the US economy.

Investors are now eagerly awaiting the release of the official US Employment data, with the Unemployment Rate expected to remain unchanged at 3.5%. According to the consensus for Nonfarm Payrolls (NFP), the US economy added 179K jobs in April, lower than the former release of 236K. 

Along with the labor market numbers, investors will also be keenly watching the Average Hourly Earnings, which are expected to remain unchanged at 0.3% and 4.2% on a monthly and annual basis, respectively.


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