Asian equities could trade positively after a strong rally on Wall Street in the wake of a dovish Fed Chair Powell remarkets. Stocks broke the highs as the Fed Chair suggested that the December meeting may be time to downshift to a moderate pace of rate hikes. It is also worth noting that the last two days’ price action showed market positioning for a hawkish speech. As it did not materialise, traders then unwound some short exposure, causing a short squeeze flow. The dovish note and technical positioning on the Fed and behind month-end flows could support risk in today’s session.
On the China front, traders are abiding risk as the Yuan rallied against the USD after COVID restrictions were eased amid reports that community COVID testing can be dropped for those not needing to venture outside. Participants have been waiting for more relaxed conditions from Chinese officials amid recent riots. With that, risk-taking on Chinese stocks could return to the playbook as many single names are trading at attractive valuation levels. With December on the radar, investors will turn their attention to the macro data before the next Fed meeting. The Personal Consumption Expenditures (PEC), the Fed’s preferred inflation metric, will be out later today, and markets are now turning dovish. If data shows a miss, risk assets could keep being supported, and the USD weaker further.
