The USD/JPY pair has faced selling pressure as the meeting between US President Joe Biden and House of Representatives Speaker Kevin McCarthy has been concluded without an agreement. Speaker McCarthy has termed the meeting as constructive but an agreement has not been made yet. US Biden has denied agreeing over proposed spending cuts in the budget calling them ‘extreme’ while Republicans are not supportive of the proposed new taxes on the Wealthy community.
S&P500 futures are holding significant gains added in early Asia, portraying an overall upbeat market mood. The risk profile has turned positive while the US Dollar Index (DXY) is facing sheer pressure. The USD Index has tested the territory below 103.20 as investors are cautious over approval of the US debt-ceiling raise and the United States economy is inching positively towards a default, which could trigger a recession.
Apart from them, Minneapolis Fed Bank President Neel Kashkari cited that there is no way the Fed can protect the economy from the negative effects of default. Fed policymaker is interested in delivering a vote for a pause in the policy-tightening spell by the central bank but is not done with interest rate hikes yet.
Going forward, preliminary US S&P PMI data (May) will remain in the spotlight. Manufacturing PMI is seen softening to 50.0 from the former release of 50.2. While Services PMI is expected to remain steady at 53.6.
On the Japanese Yen front, a surprising recovery in economic prospects has improved the outlook for the Japanese economy. Analysts at UOB cited Japan’s growth momentum in the first quarter of CY2023 as stronger than forecast as we underestimated the impact of re-opening on private consumption and the surprise jump in business spending, while the fall in commodity prices helped further trim the country’s ballooning import bill.
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