Asian equities could trade choppy as traders will be plugged into the US and the UK Central Banks themes. Participants will be digesting the recent sell-off on the UK bond markets and mixed FOMC Minutes where officials judged they needed to move to and maintain a more restrictive policy stance. At the same time, policymakers also observed that as the stance of monetary policy tightened further, it would become appropriate at some point to slow the pace of policy rate increases, which resulted in a short-lived dovish price action across FX, bonds and equities markets.
With a mixed message from Fed and the markets stressed amid headwinds from inflation, rates, growth and earnings releases, traders will be paying close attention to today’s US Consumer Price Index data. Once again, the core readings could be key to triggering a major reaction on global assets. Core services should again be a primary driver of inflation as lags from rent, and home price measures indicate another strong monthly gain. Wage gains are quite important to the services sector and remaining elevated could keep markets under pressure on front-end rates. A hawkish reaction to the data could add more pressure to stocks and a bid on the USD as US rates differentials could widen amid some Central Banks starting to signal a pause in their tightening cycle.
