Asian equities are poised for a positive start, buoyed by the prevailing risk-on sentiment on Wall Street, where the US House passed the debt ceiling bill, awaiting Senate ratification. Market participants sifted through an array of data releases, while start-of-the-month trades also contributed significantly to the near-term price fluctuations. The US Dollar, a crucial barometer for risk appetite, exhibited weakness amid the optimistic risk climate, as US yields softened, influenced by the same data that propelled equities higher. Remarks from the Federal Reserve’s Harker, intimating the Fed’s closeness to a stage where it can sustain stable interest rates and proposing the possibility of bypassing a rate hike in June, added to the pressure.
Today’s primary macroeconomic event is the US Nonfarm Payroll (NFP) report. Consensus anticipates a continued deceleration in payroll growth in May to +195k, down from the previous figure of +253k. The inflationary aspect of the data, the average hourly earnings, is projected to be impacted by unfavourable calendar effects and easing wage pressures. Any outperformance on the data front could act as a catalyst for a short-term surge in US short-term yields and could ripple through to risk assets. Market participants will continue to hedge and position themselves in anticipation of the next FOMC meeting in mid-June, where a roughly even possibility exists for either a pause or a hike in rates.