Asian equities are poised for a potentially negative trading session, echoing Wall Street‘s recent retreat amidst heightened risk aversion. This backdrop saw a dip in global equities and an uptick in yields across the fixed-income spectrum, fuelling robust demand for the USD. This demand is largely attributed to the dynamics of higher yields and the impact of month/quarter-end trades.
Attention is also sharply focused on the evolving situation around the US stopgap bill. With the deadline fast approaching, anxieties are intensifying over a potential US government shutdown. Recent developments indicate that House Speaker McCarthy is not inclined to allow a vote on the Senate-passed stopgap bill. Instead, a new proposal is slated for a House vote on Friday, though it is anticipated to face challenges in the Senate. Any positive or bad news on the theme could affect the price action on risk assets as positioning is high for the event.
With quarter-end technical trades set to influence short-term price action, the markets are gearing up for a series of key economic disclosures ahead of the extended weekend in China. These include the third revision of US Q2 GDP and the latest data on weekly jobless claims. Additionally, several Federal Reserve representatives, including Chair Powell, are scheduled to speak on a range of subjects encompassing the economy and monetary policy. These discussions are poised to offer deeper insights into the Federal Reserve’s perspectives and prospective measures. The interplay between USD demand and the movements in credit spreads and yields remains a focal point, given the high correlation with yield dynamics. Analysts and traders alike will be closely monitoring these developments, seeking to gauge their implications for the broader financial landscape as we head to the final quarter of the year.
