Equities drift higher in Asia

Jeffrey Halley MarketPulse

FOMC decision could trigger gains on Wall Street

Wall Street had a non-descript session overnight, with the usual big tech inflows lifting the NASDAQ and the technology components of the S&P 500. The S&P 500 drifted 0.52% higher, the NASDAQ rose 1.21%, and the Dow Jones was unchanged. US equity futures have drifted higher in Asia this morning.

Asian markets have contented themselves to follow Wall Street’s lead quietly as they await the FOMC this evening. The Nikkei 225 and Kospi are 0.10% higher, with China’s Shanghai Composite, CSI 300 and Hang Seng unchanged in early trade. Singapore is 0.40% higher with Australia’s ASX 300 and All Ordinaries 0.70% higher. Malaysian markets are closed today.

All in all, Asia looks set for a modestly positive session and will be subject to the whims of headline-driven short-term volatility with the regional data calendar empty. The markets could become much more active, however, after the FOMC decision. The FOMC will keep the Federal Funds Rate unchanged between 0.00 and 0.25%, with Chairman Powell’s press conference the real main event. The Fed is likely to repeat its lower for longer call on rates and to do whatever is necessary on the liquidity front to support growth and unemployment.

We may get some insight into the nuances of their new “average inflation targeting” process. This marks a dramatic shift in Fed policy, which until now had a firm inflation target of 2 percent. The new stance means that the Fed will allow inflation to overshoot the 2 percent threshold before raising interest rates, if this follows a period of low inflation. At the same time, market watchers expecting an indication of exactly how far they would allow inflation to overshoot 2.0%, and for how long, are likely to be disappointed. In all likelihood, the Fed isn’t probably isn’t quite sure itself, and will manage that situation dynamically.

The FOMC announcement could trigger a buy everything FOMO trade session on Wall Street, which would spell healthy gains on the equity markets.

Author

Jeffrey Halley

MarketPulse

With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.