Asia equities are trading positive after a volatile lead from Wall Street, where stocks wiped out earlier gains following the Fed decision and remarkets from Fed Chair Powell in which he didn’t rule out aggressive hikes this year. Equities sold off, rates and the US Dollar went higher after some hawkish signals from Powell when he was asked about larger than 25bp fed funds rates hikes, in which he conceded it hasn’t been determined yet, glimpsing markets speculate there is a non-zero chance of 50 bp hikes in the future, which helped strengthen market pricing for a 50bp hike in the March meeting. Traders will now keep a close eye on FOMC speakers in the coming days to see if a faster hike pace could be on the table and further information on potential cycle pace and balance sheet runoff strategy.
On the geopolitical front, the mood with Russia remains liquid, although Normandy talks are set to resume in two weeks time and a cease fire has been agreed although tensions continue rife with more reports of troops being considered to be sent to Ukraine while the US has now sent its written response to Russia. The RUB and Russian rates are trading volatile first when any fresh information hits the wires, so it is worth keeping an eye in case of any development that could spur other sensible assets like Oil, Metals, stocks and safe haven in the FX and Fixed Income space. Traders will now be suggesting the Fed decision ahead month-end trade with somewhat thin liquidity conditions.
