Stocks could trade soft as reports suggesting US House Speaker Pelosi is to go ahead with her visit to Taiwan caused broad risk sentiment. It is also worth noting that the maritime administration in Qinglan, South China’s Hainan, issued a warning and prohibited entry to an area in the South China Sea due to military exercises from Tuesday to Saturday.
Participants might be looking for defensive positions for the next few days as the geopolitical situation could escalate in the next few days. The USD could be in demand for risk-off positioning, so it is worth keeping a close eye on the Greenback against the Yuan, Yen, and New Taiwan dollar. Any signals of tension’s scalation, the US Dollar could bid immediately, and risk assets like equities go south. On the policy front today, traders will monitor the RBA as it will likely lift its cash rate target by 50bp at its meeting today on the back of the ongoing tightening of the labour market, level of inflation and expected acceleration in price pressures. Fixed income could be a key driver later today. The bulk of the Fed will give remarks after last week’s ‘dovish’ pivot.
