USD/JPY skids below 136.00 as investors anticipate a pause in Fed’s policy-tightening spell

• USD/JPY has slipped below 136.00 as expectations for a Fed’s policy-tightening pause have soared.
• Tight credit conditions by US regional banks have resulted in a decline in loan disbursals.
• Approval of an increase in the US debt-ceiling will also undermine the USD Index as it will impact the long-term outlook of the US economy.

The USD/JPY pair has slipped below the crucial support of 136.00 in the Tokyo session. The asset is expected to remain on tenterhooks as investors are waiting for the US borrowing cap negotiations between the White House and congressional Republicans.

S&P500 futures have generated nominal losses in early Asia after a decent bullish Monday, portraying a minor caution in the overall risk-on market mood. US equities remained in a positive trajectory as the Federal Reserve (Fed) is considering a pause in its aggressive rate-hiking spell. Tight credit conditions by US regional banks have resulted in a decline in loan disbursals for small-scale firms while a pause in the policy-tightening spell will provide them a sigh of relief.

Meanwhile, Atlanta Federal Reserve President Raphael Bostic told Bloomberg on Monday that, if he were voting now, he would vote to hold rates in June. However, he warned that he has to keep a possible rate hike on the table.

The US Dollar Index (DXY) seems vulnerable above 102.40 on expectations of a stable monetary policy. Apart from that, approval of an increase in THE US debt-ceiling will also impact the USD Index as it will impact the long-term outlook of the United States economy, which will increase volatility for the US Dollar and S&P500.

On the Japanese Yen front, April’s Producer Price Index (PPI) softened on Monday. Monthly economic data accelerated at a slower pace of 0.2% than forecasted at 0.3%. Annual PPI data slowed down to 5.8% vs. the estimates of 6.0% and the former release of 7.4%. This would force the Bank of Japan (BoJ) to keep the dovish monetary policy active ahead.