Federal Reserve Chair Jerome Powell’s dovish remarks at the Jackson Hole symposium, hinting at a possible rate cut in September, are expected to boost sentiment in Asian markets. This shift has sparked expectations of improved risk appetite and strong performances in Asian stocks and bonds.
The weakening of the US dollar is also one of the influencing factors. The pressure on interest rates has led to a decline in the attractiveness of dollar-denominated investments and may prompt capital to flow to Asia. However, analysts say it is uncertain whether this rally can last, depending on the upcoming economic data and corporate earnings, as well as whether the Federal Reserve commits to further deepening the easing cycle. If the situation remains unclear, the rally may only be short-lived.
Powell’s speech seemed to acknowledge a rate cut in September, but his stance was not that dovish as he indicated it would depend on the data. The USD/JPY rose because the market expected him to make tough remarks, and thus it fell back by the corresponding extent.
Steven Englander, global G-10 foreign exchange research head at Standard Chartered Bank: “Unless Powell believes that the possibility of the Federal Open Market Committee cutting interest rates is quite high, he wouldn’t have made such a speech. It makes no sense to raise expectations and then disappoint. For the market, the question is how high the non-farm payroll data needs to be to prevent a rate cut and how low it needs to be to justify a 50 basis point cut.”
Katsutoshi Inadome, senior strategist at Sumitomo Mitsui Trust Asset Management: “Looking across the Asian markets, we see that market sentiment is shifting towards risk appetite in response to expectations of the Fed’s easing policy. Stock markets are rising, and commodities such as oil and gold are also in demand. All of this indicates that the market is beginning to digest the impact of US interest rate cuts. In the bond market, the same risk appetite tone may cause some upward pressure on yields. But ultimately, it depends on how central banks respond.”
Technical analysis:
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Gold: Powell’s remarks at the central bank’s annual meeting were relatively moderate. Gold may continue its upward technical adjustment in the short term. We remain optimistic about the price today and look forward to the momentum signal appearing in the blue area; or wait for the liquidity in the yellow area to be swept low and then continue to try to buy low. For detailed positions, please consult the plugin.
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Nasdaq: Today’s configuration is similar to that of gold, but the low-buying area below has turned into a more aggressive green. For detailed positions, please consult the plugin.
(NASDAQ 15-minute chart)
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Crude oil: The buy limit after the breakout in the blue zone last Friday has not yet fully taken effect. We suggest holding the position intraday. If you want to open a new position, wait for a new momentum signal to appear and protect the position opened last Friday at the same time. For detailed positions, please consult the plugin.
(Crude oil 15-minute chart)
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Today’s key economic data and events to focus on:
16:00 Germany August IFO Business Climate Index
22:00 US New Home Sales for July
22:30 U.S. Dallas Fed Manufacturing Index for August
