Asian equities could rally on the back of a risk-on trade on Wall Street after a dovish FOMC press conference where Fed Chair Powell said that they have not yet made a decision on the terminal rate and noted the FOMC members are talking about a couple more rate hikes to get to an appropriately restrictive stance but added they are not very far from that level and acknowledged that the disinflationary process has begun. Altogether the path seems paved to 25bp hikes in March and May, but there may be even more heightened sensitivity than usual to incoming data over the next few months. The markets are cleared and positioned for a dovish tilt, which could support further strength on EM assets as US Treasury Yields and the USD lose steam.
For the session ahead, price action will become somewhat volatile with traders adjusting exposure after the FOMC decision with two major central banks announcing their policy decision, and both the BOE and ECB decisions are scheduled. And attention will be on US large-cap earnings, such as Apple, Microsoft and Google, later today, ahead of China’s PMIs, US Nonfarm Payroll and ISM Services, all on Friday.
