Asian markets may face challenges following a cautious day on Wall Street. Traders continue to assess the recent hawkish stance from the FOMC and the decline in US initial jobless claims to levels not seen since January. Additionally, rising prices in the Philly Fed survey have heightened inflation concerns. The US Treasury Curve saw a noticeable steepening throughout the session, impacting both global credit and equity markets. This latest data fuels arguments for more aggressive rate hikes by the Fed.
Attention is now directed towards the Bank of Japan’s (BoJ) announcement on Friday, with the Yen strengthening in recent times. It is largely expected that the central bank will hold its Bank Rate at -0.10% and sustain its current Quantitative and Qualitative Easing with Yield Curve Control measures. BoJ probably will not modify its accommodating policy in this session. It’s noteworthy that recent discussions of a potential shift early next year gained traction following remarks from Governor Ueda. Any strong hawkish indications could lead to adjustments in global yields and a boost for the Yen. The banking sector in Japan might also benefit from the possibility of rising yields.
Also under the spotlight this Friday are the S&P Global PMIs. Market participants will keenly follow remarks from Fed officials Cook, Daly, and Kashkari post the FOMC blackout period. Any firm stance or deviation from current market expectations could incite significant movements in global markets. US rates, USD, and the stock market will be a key indicator this session.