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USD/JPY pares weekly losses to around 138.85-90 in the opening minutes of Friday's dull session as traders await the US jobs data amidst a light calendar in Japan. Recent conflicting sentiments regarding the US Federal Reserve (Fed) and the Bank of Japan (BoJ), as well as the inactive bond market as of press time, may have contributed to the market's inactivity.

However, the US 10-year Treasury bond yields post their first daily gain in six days as they rebound from a two-week low to 3.61% as of press time, while the two-year counterpart stabilizes near the weekly bottom around 4.35 percent following a three-day decline. It should be noted that despite Wall Street's positive performance, the S&P500 Futures remain mildly bullish.

On the other hand, the weakness of the US Dollar is the most important factor favoring Yen purchasers. In spite of this, the US Dollar Index (DXY) fluctuates around 103.56 at press time, after declining the most in a month and reversing from the highest levels since mid-March the day before.

The market's pricing of a Fed rate hike and cautious optimism about China, as well as the US debt ceiling agreement, appear to be the primary causes of the USD's decline. Notably, interest rate futures indicate that the market's valuation of a rate hike by the Federal Reserve (Fed) decreased from 17 basis points (bps) in June on Wednesday to 7 bps on Thursday. The reduction in hawkish Fed wagers is due to recent mixed US data and the absence of robust Fed discussions.

US ADP Employment Change decreased to 278K in May from 298K in April (revised), but exceeded market expectations of 170K. In the same vein, the weekly Initial Jobless Claims surpassed 230K before 232K, as opposed to the predicted 235K. In addition, the US ISM Manufacturing PMI decreased to 46.9 in May from 47.0 expected and 47.1 previous readings, while the S&P Global Manufacturing PMI decreased to 48.4 from 48.5 previously. In addition, the US Employment Cost Index decreased and the consumer sentiment index rose, but the specifics were unremarkable.

James Bullard, president of the Federal Reserve Bank of St. Louis, recently published an analysis in which the Fed hawk acknowledges that the prospects for sustained disinflation are favorable, but not guaranteed, and that continued vigilance is required.

Higher inflation numbers and Retail Trade data, published earlier in the week, push the Bank of Japan (BoJ) towards higher rates, even though the International Monetary Fund's (IMF) Chief Economist Pierre-Olivier Gourinchas stated on Thursday that it is "too early for the Bank of Japan (BoJ) to tighten monetary policy as re-anchoring inflation expectations to its 2% target will take time."

Moving forward, the monthly US employment data and the final round of Federal Reserve talks preceding the Federal Open Market Committee (FOMC) blackout period for policymakers will be intently monitored for clear direction. Nonfarm Payrolls (NFP) are anticipated to decrease to 190K from 253K previously, while the unemployment rate is anticipated to increase from 3.5% to 3.5%. The passage of the debt-ceiling measure by the U.S. Senate and the avoidance of default problems should also be viewed as clear indicators.

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