Asian equity markets may experience volatility following a slight pullback on Wall Street, triggered by mixed economic indicators from the United States and Europe. In the US, the labour market demonstrated resilience, surprising many with an increase in job openings as reported by the JOLTS data. This led to a rise in US bond yields and a subsequent dip in stock prices, as investors adjusted their expectations for the Federal Reserve’s monetary policy easing.
Traders are strategically positioning themselves in anticipation of the Federal Reserve’s forthcoming meeting and a slew of US economic data releases, including the announcement of the US Treasury’s Quarterly Refunding. The end-of-month trading could also contribute to market volatility. The focus will be on the Federal Reserve’s decision, with the consensus anticipating the maintenance of current interest rates. However, adjustments in forward guidance may occur, reflecting a more cautious approach due to recent signs of disinflation. A significant point of discussion will be the timing of the first-rate decrease, potentially in March or later, and any modifications or pauses to the Fed’s Quantitative Tightening strategy. Market sentiment has shifted away from expectations of significant rate cuts this year, making this meeting crucial for bond market participants to reassess their expectations towards more or fewer rate reductions, which could influence today’s market dynamics and increase hedging activities. Attention will also be directed towards China’s manufacturing PMI data, which is expected to indicate ongoing contraction, highlighting the persistent economic challenges the country faces in its post-pandemic recovery.
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© 2019 High Leverage FX - All Rights Reserved.