Asian markets might see mixed trading following a tumultuous Wall Street session ahead of critical data preceding the key FOMC decision. The Federal Reserve announced a significant shift in policy, reducing its quantitative tightening pace from USD 60 billion to USD 25 billion monthly, a softer adjustment than the expected USD 30 billion. During his press conference, Fed Chair Jerome Powell emphasized the central bank’s intent to maintain its current policy level for a prolonged period, downplaying the possibility of imminent rate hikes. “It’s unlikely the next move will be a hike,” Powell remarked, citing ongoing challenges in meeting the Fed’s 2% inflation target despite a tight policy approach. Initially, the market reaction leaned dovish as Powell dismissed an immediate rate increase, but equities relinquished those gains by the close, underscoring the market’s tentative stance on the dovish outcome.
In the currency markets, right after the FOMC briefing concluded, the USD/JPY pair experienced significant fluctuations, crossing 154 amidst robust trading, prompted by speculation of potential intervention by Japan’s Ministry of Finance amid the day’s thinner liquidity. This could exert some pressure on Japanese equities, potentially making them the laggards at the open. As traders evaluate the Fed’s recent policy direction, focus shifts to forthcoming economic indicators, including U.S. jobless claims and the pivotal non-farm payrolls data on Friday. The Fed speakers’ circuit will also garner attention as market participants keenly await insights from other FOMC members regarding the Fed’s rate outlook for the coming year after recent notable wage and inflation figures.
