Asian equities could trade with strong gains following a solid rally in the US and global risk assets. The risk-on play came after the FOMC policy statement aligned with the participants’ expectations. However, Fed Chair Powell was dovish at the press conference and suggested that the Committee had now moved onto a data-dependent, meeting-by-meeting basis rather than flagging the size of a rate hike increment that the FOMC would debate. The dovish pivot was probably a result of the cooling of some macro indicators and increasing risks of a deep economic downturn.
Traders could now adjust their expectations of the Fed’s rate path and exposure to risk assets as it seems that the Fed is unwilling to stay on an aggressive policy instance for longer. The US Money markets are now pricing the extent of rate cuts next year after Fed Powell’s comments. For the session ahead, traders, we will be on the lookout for any Fed speaker’s remarks today. Key data could add to the recent dovish reaction on risk assets if it shows a miss. The data docket shows US Q2 GDP later today and US Core PCE for June tomorrow.
