Asian equities are poised for potential pressure as US stocks retreated due to an assertive FOMC interest rate forecast. The updated Dot Plot reveals that the majority of Fed members expect an additional rate increase by year-end, and they predict higher terminal rates for 2024. Market observers should monitor the USD and Bond markets price action in Asia closely, as traders often position themselves before the European market opens. With global interest rates on the rise, sectors sensitive to extended durations, like technology, may face challenges.
Moving forward, traders will scrutinize every piece of data from the US, with a particular emphasis on inflationary indicators, to gauge the potential for prolonged high rates. Such a trend might further amplify interest rate disparities, placing currencies like the Yuan and JPY in a vulnerable position due to adjustments in debt markets resulting from elevated US interest rates. Furthermore, if energy prices continue to climb due to production limitations from leading producers and diminished oil reserves in major economies, they will play a pivotal role. The stance of central banks will undeniably dominate financial market discussions in the upcoming months. Market enthusiasts are keen to understand how incoming data will influence rate determinations, especially as economic growth emerges as a dominant variable. Initial remarks from FOMC members are expected on Friday, marking the end of the blackout period.