The USD/JPY pair has dropped below the key support of 135.00 in the early European session and is now searching for a cushion. The uncertainty surrounding US inflation has accelerated the major’s recovery.
The US Dollar Index (DXY) has remained flat during the Asian session and is continuing on the same path in Europe ahead of US Consumer Price Index (CPI) data and debt ceiling negotiations.
In early London trading, S&P500 futures showed choppy performance as investors remained cautious, resulting in a quiet market mood. The outcome of the US debt ceiling negotiations is expected to bring about significant changes for US equities.
To prevent further delays that could severely damage the US economy, US President Joe Biden has invited top Republican leaders and other congressional diplomats to approve higher relocation for the debt ceiling.
US Treasury Secretary has already warned that a delay in the debt ceiling raise approval could impact the long-term outlook of the US economy. Republican House of Representatives Speaker Kevin McCarthy is expected to negotiate heavily on spending initiatives to reduce the deepening budget deficit.
The unfavorable debt ceiling deal has caused US yields to fall. The 10-year US Treasury yields have dropped below 3.5% as demand for government bonds rebounds.
Regarding the Japanese Yen, Bank of Japan (BoJ) Governor Kazuo Ueda stated on Tuesday, “The impact of recent US and European bank failures on Japan’s financial system is likely limited.” BoJ Ueda also cited that Japan’s inflation expectations have increased and remain at elevated levels.
Overall, investors are closely monitoring the US inflation data and debt ceiling negotiations as they wait for a clearer direction in the markets.
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