Asia Day Ahead: Market calm ensued following FOMC meeting
The Asian session is set for a positive open as broader sentiments were relieved to get past the recent US inflation data and the FOMC meeting without much of a hiccup.
Asia Open
The Asian session is set for a positive open, with Nikkei +0.23%, ASX +0.53% and KOSPI +1.65%, as broader sentiments were relieved to get past the recent US inflation data and the Federal Open Market Committee (FOMC) meeting without much of a hiccup. The VIX plunged more than 6%, once again with its struggle to see any significant pick-up pointing to a risk-on environment.
Overnight sector performance revealed a continued lean into AI-exposed names, as traction continued to follow through from Apple’s latest artificial intelligence (AI) push. The ‘Magnificent Seven’ stocks continues to lead the pack, creating a further disparity between growth and value. For now, falling US Treasury yields and a weaker US dollar in reaction to the lower-than-expected US consumer price index (CPI) has offered less of a hurdle, as sentiments will continue to digest the latest FOMC outcome over the coming days.
FOMC digest
Overnight, the Federal Reserve (Fed) kept interest rates unchanged at 5.25-5.50% as widely expected, while focus had all along been on the dot plot projections to gauge the timing and scale of any easing ahead. From the median dot, a paring back to only one rate cut this year from previous three cuts has been the key takeaway in what is deemed as a “hawkish hold”, while the median dot for the next two years revealed an additional cut from the March projections.
Fed Chair Jerome Powell did acknowledge recent inflation progress but stuck to the view of wanting to see more, which is expected given that inflation is still some distance away from its 2% target. He also downplayed the recent strength in US labour data, once again repeating his script that it is coming into “better balance”. Overall, there has not been too much of a surprise from before and the absence of any hawkish tilt will be very much welcomed.
Of course, one may argue that delayed policy easing just shows that economic conditions are holding up well, and past periods of rate hold has generally been supportive of risk sentiments. As long as additional rate hikes are off the table, which was reiterated in Fed Chair’s comment that rates are “sufficiently restrictive”, markets may continue to seek comfort with the current environment once rate expectations recalibrate.
What to watch: USD/JPY
With the FOMC meeting behind us, the next significant event lies up ahead – Bank of Japan (BoJ) meeting on Friday. Thus far, the upward channel trendline remains intact despite a weaker US dollar overnight, as market participants took the opportunity for some dip-buying. Given the recent ‘hawkish hold’ outcome from the Fed, if the BoJ were to stick to its usual accommodative tone in terms of policy settings, that may pave the way for the upward trend in USD/JPY to continue.
For now, the 155.00 level may be on watch for any immediate defending from the bulls, where the lower channel trendline stands in confluence with its daily Ichimoku Cloud support. Any success in doing so may see buyers potentially eyeing for a retest of resistance at the key 160.00 level.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Act on share opportunities today
Go long or short on thousands of international stocks with spread bets and CFDs.
- Get full exposure for a comparatively small deposit
- Trade on spreads from just 0.1%
- Get greater order book visibility with direct market access
See opportunity on a stock?
Try a risk-free trade in your demo account, and see whether you’re on to something.
- Log in to your demo
- Take your position
- See whether your hunch pays off
See opportunity on a stock?
Don’t miss your chance – upgrade to a live account to take advantage.
- Trade a huge range of popular stocks
- Analyse and deal seamlessly on fast, intuitive charts
- See and react to breaking news in-platform
See opportunity on a stock?
Don’t miss your chance. Log in to take advantage while conditions prevail.
Live prices on most popular markets
- Equities
- Indices
- Forex
- Commodities
Prices above are subject to our website terms and agreements. Prices are indicative only. All share prices are delayed by at least 15 minutes.
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
