Asian equities are poised for a potential dip as they follow the trajectory of the global equity market, notably Wall Street, which hovered near session lows before closing. The palpable tension among participants arises from the looming possibility of a US government shutdown scheduled this Saturday, prompting unwinds of positions. Traders remain vigilant, closely monitoring these developments. The prospect of a government shutdown, coupled with ongoing economic indicators, plays a pivotal role in molding investor sentiment and steering market directions. The arrival of a resolution before Friday could bring relief to risk assets. Conversely, the continuation of the current non-deal situation might maintain the pressure on the markets.
Focusing on the macro perspective, the USD serves as a crucial barometer leading up to the US fiscal event, the release of US Personal Consumer Expenditures inflation data, and the quarter/month-end trade. Adding another layer to the price action is the Chinese property sector, particularly with Evergrande missing bond payments following an extended holiday in China. Consequently, the Asia/Pacific credit market may continue to experience pressure due to hedging activities preceding the holiday.
In the upcoming session, traders will closely scrutinize the minutes from July’s BoJ meeting, keeping a keen eye on USD/JPY, which has so far remained largely stable. The Yen has found some support following remarks from Finance Minister Suzuki, who emphasized the need for close monitoring of FX movements. There is speculative trading sentiment in the market, with traders anticipating that if USD/JPY crosses the 150 mark, it could prompt the Ministry of Finance of Japan to intervene in the FX market.
