USD/JPY eyes a consolidation break above 135.50 as focus shifts to US Inflation

• USD/JPY is aiming for a consolidation breakout ahead of the US inflation data release.
• US President Joe Biden made clear during the meeting that the US economy default is not an option.
• Fed Williams sees no reason for rate cuts this year and has advocated further rate hikes if needed.

The USD/JPY pair is making efforts for a consolidation breakout placed in a range of 134.69-135.36 in the past three trading sessions. The major is expected to remain in action ahead of the release of the United States inflation data (April).

S&P500 futures are showing mild gains after a bearish Tuesday, portraying a minor recovery in the risk appetite. However, the overall market mood is quite precautionary as investors are anxious ahead of US Consumer Price Index (CPI).

The US Dollar Index (DXY) has resumed its downside journey after a retreat from 101.70 as the US debt ceiling talks ended without a conclusion and the White House and Republican leaders will meet again on Friday. US President Joe Biden reiterated the requirement of raising the debt ceiling without compromising the spending budget but is ready for a separate discussion about the budget. He made clear during the meeting that the US economy default is not an option.

It is highly likely that a clear debt ceiling bill will not get passed and both parties would agree on a bipartisan agreement.

Meanwhile, New York Federal Reserve (Fed) Bank President John Williams cited that the central bank needs to be data-dependent with monetary policy and reminded that the Fed will raise rates again if needed. He further added that the Fed has not said it’s done with raising rates and see no reason for rate cuts this year.

On the Japanese Yen front, Bank of Japan (BoJ) Governor Kazuo Ueda cited the impact of recent US and European bank failures on Japan's financial system is likely limited.” About inflation guidance, BoJ Ueda cited Japan's inflation expectations have heightened, and remain at elevated levels.