Asian equities are poised for gains, buoyed by upbeat sentiment on Wall Street ahead of the highly anticipated Nonfarm Payrolls (NFP) data release. Meanwhile, the USD has pulled back against major counterparts. A notable decline in crude prices – about USD 5 per barrel – has eased yields on U.S. Treasuries from their peaks, potentially offering a respite to inflation-linked bonds in the near term. Consequently, the credit markets may see a positive tilt today, breaking a prolonged selling streak.
The Yen remains resilient against the retreating Dollar, even as Japanese officials remain silent on potential forex interventions. Reports indicate that the Bank of Japan hasn’t intervened, but upcoming flow data may provide clarity. If the USD rallies ahead of the NFP data, traders and FX enthusiasts will be keenly watching the 150 level on the USD/JPY.
On the macroeconomic front, the US weekly jobless claims data is in the spotlight as the final sentiment gauge before Friday’s pivotal NFP release. Present market speculations lean towards maintaining the status quo in November, assigning a mere 22% probability to a rate hike. However, a significant twist in the forthcoming jobs report could alter these odds. As we edge closer to year-end, market indicators suggest a 40% chance of an additional 25bp hike. This hints at the prevailing sentiment that the Federal Reserve may have hit its rate ceiling for now.
