USD/JPY Views a Breakout Above 135.50 As Attention Shifts to US Inflation

The USD/JPY pair has attempted to break out of a consolidation range between 134.69 and 135.36 over the past three trading sessions. The major is anticipated to remain active prior to the April release of U.S. inflation data.

After a down Tuesday, S&P500 futures are showing modest gains, indicating a modest recovery in risk appetite. However, the overall market sentiment is quite cautious as investors anticipate the US Consumer Price Index (CPI) with apprehension.

Following a retreat from 101.70, the US Dollar Index (DXY) has resumed its decline as the US debt ceiling negotiations ended without a resolution and the White House and Republican leaders will meet again on Friday. US President Joe Biden reaffirmed the necessity of raising the debt ceiling without compromising the expenditure budget, but he is willing to discuss the budget separately. During the meeting, he made it plain that a US economic default is not an option.

It is highly likely that a clear debt ceiling bill will not succeed and that both parties will reach a compromise.

John Williams, president of the New York Federal Reserve (Fed) Bank, stated that the central bank's monetary policy must be data-dependent and that the Fed will raise rates again if necessary. He added that the Fed has not declared an end to rate hikes and sees no reason for rate reductions this year.

Governor of the Bank of Japan (BoJ) Kazuo Ueda stated that the impact of recent US and European bank failures on Japan's financial system is likely to be limited. Regarding inflation guidance, Ueda stated that Japan's inflation expectations have increased and remain elevated.