Asian equities could keep trading in risk-on mode as US equities ultimately rallied yesterday after a dovish pivot from the Fed. Traders will now watch cross-asset correlations closely with the price action driven by the soft dollar and lower global yields. Broad “buy the dips” demand from participants could keep supporting risk assets in Asia after months of portfolio outflows from the region assets.
On the trade front, no major update and market reaction on tariffs on the Biden-XI call yesterday as Xi told President Biden that the US should abide by the ‘One China’ policy and act in line with its words. On the FX front, strong flows are seen on the Japanese Yen, and it was the clear outperformer against the dollar, a beneficiary of perceptions that Fed policy may not get too far from the neutral rate level. Overnight there is a range of Japanese data, which could bring some volatility to the currency, whereas dollar and US Yields dynamics will be key to the trend. On the macro front, traders will also focus on the Personal Income, Personal Spending, Chicago PMI and the University of Michigan sentiment figures to close the month and session. And as the Fed comes out of a blackout, any commentary from Fed Speakers could get special attention on the wires after the dovish pivot last Wednesday.
