USD/JPY remains quite around 138.60 as investors baffle due to US debt-ceiling raise delay

• USD/JPY has turned quiet around 138.60 amid a lack of clarity over further action after a delay in the US debt-ceiling raise.
• The US Dollar Index is in an inventory adjustment phase after reclaiming the previous week’s high above 103.60.
• Japanese economic prospects are getting stronger amid wage growth and a recovery in overall demand.

The USD/JPY pair is displaying signs of a sheer decline in volatility around 138.60 as investors are confused about further action in the FX domain. The asset is struggling to deliver a decisive move amid a lack of clarity as US debt-ceiling issues are not reaching a bipartisan deal.

S&P500 futures have posted some gains in early Tokyo. US equities were heavily sold on Tuesday as investors are worried that a default by the United States economy in addressing its obligated payments will trigger a recession. Market sentiment has dampened amid obscurity in global markets.

The US Dollar Index (DXY) is in an inventory adjustment phase after reclaiming the previous week’s high above 103.60. It is difficult to consider further direction as investors are awaiting the release of the May meeting Federal Open Market Committee (FOMC) minutes.

Investors should not that Federal Reserve (Fed) chair Jerome Powell cited in May’s meeting that the central bank will be more data-dependent from now after hiking interest rates by 25 basis points (bps). On Friday, Fed Powell delivered a dovish interest rate guidance, supported a pause for June’s monetary policy meeting as tight credit conditions by US regional banks are weighing heavily on inflationary pressures.

On the Japanese Yen front, economic prospects are getting stronger amid wage growth and a recovery in overall demand. Reuters Tankan Survey reported Business sentiment at big Japanese manufacturers turned positive for the first time this year and service-sector morale hit a five-month high, providing more evidence of an economy on the mend after a COVID-led recession,”

Also, Manufacturing PMI (May) jumped to 50.8 vs. the estimates of 49.5 while Services PMI soared to 56.3 against the estimates of 55.2 in the same period. These conditions might support Japan’s inflation for steadily remaining above 2%.