Asian markets are poised for a positive open, buoyed by momentum from Wall Street where stock markets rallied on Thursday. This surge was primarily fuelled by the Communication sector, with Google leading the pack. The tech giant’s shares skyrocketed following the debut of its advanced AI model, Gemini. This bullish sentiment is likely to spill over to the Asian tech sector, especially in semiconductors, where AMD is in the spotlight after announcing a new chip developed in collaboration with Meta, Oracle, and OpenAI.
Traders are also keenly monitoring developments from the Bank of Japan, as Governor Ueda hinted at a potential policy shift in the upcoming December 18-19 meeting. This shift could include terminating the Negative Interest Rate Policy (NIRP) and may be influenced by a lacklustre 30-year JGB auction. The Yen has already seen a significant uptick across Asian, European, and US markets, marking the USD/JPY‘s largest single-day drop since December 2022. Further confirmation of these policy changes could propel the JPY even higher, impacting other major currencies, particularly the Yuan and Euro. A denial of the current market’s view and pricing could cause a strong reversal on current expectations that could drive bond, FX and even short-term equity markets price action.
Attention is also fixed on today’s US payroll report, with a specific focus on the Unemployment Rate. Forecasts suggest a decrease to 3.8%, which diverges from the overall market consensus. Wage inflation will be also key. The report’s results are anticipated to be a major driver in reshaping rate market expectations, influencing FX trends and the performance of risk assets. This will set the tone for interest rate policy expectations in the upcoming year. As markets are tilted to a dovish tone, a beat on the data could force some pullback on risk before next week’s FOMC decision.
