The dollar fell on Wednesday as investors awaited the U.S. Federal Reserve’s decision announcement later in the day, with many looking for signals of a pause in future rate hikes. Asian equities rose on Wednesday, powered by Chinese stocks on reopening prospects.
With the Euro Stoxx 50 futures for the entire area up 0.5%, European markets appeared poised to maintain the cautious optimism. The Nasdaq futures increased by 0.4% while the U.S. S&P 500 futures grew by 0.3%.
At 2 PM EDT (1800 GMT) on Wednesday, the largest central bank in the world is scheduled to release its policy statement. Investors will closely examine the document and remarks from Fed Chair Jerome Powell for any indication that policymakers are considering slowing rate increases.
Market participants anticipate that the Fed will boost its benchmark nightly interest rates by 75 basis points (bps), for a total increase of four consecutive times, to a range of 3.75% to 4.00%.
CME’s Fed tool showed futures markets are pricing in a 44.5% likelihood of a 50-bps increase, while traders are divided on the amount of the hike in December.
Kevin Cummins claimed the chief U.S. economist at NatWest Markets, Chair Powell will likely make every effort to avoid saying anything that may be seen as indicating that the inevitable reduction in the pace of tightening represents a turning point toward the conclusion of the tightening cycle.
The markets may tilt slightly more toward officials delaying any indications of a pullback in the inflation-related statistics and delaying the announcement of a reduction in the magnitude of hikes.
Cummins anticipates that the Fed will reduce its December boost to 50 basis points.
After stumbling earlier in the day, MSCI’s broadest index of Asia-Pacific shares outside of Japan (.MIAPJ0000PUS) increased by 0.8%. Chinese blue chips (.CSI300) and Hong Kong stocks (.HSI) reversed losses on expectations that China will relax its rigorous zero-COVID limits.
Following last month’s vicious selling, a letter that was circulating on social media platforms on Tuesday claimed that China was contemplating a reopening from severe COVID limits in March. However, quarantines and economic disruptions in China are on the rise once more, and some analysts predict that there won’t be any significant regulatory changes until well into 2019 or possibly 2024.
Wednesday’s investment meeting in Hong Kong aims to restore the city’s reputation as the financial centre of the region after COVID devastated it, with Chief Executive John Lee promising that efforts to eliminate COVID limits will continue.
Chinese decision-makers welcomed foreign investments in Hong Kong and reiterated their support for the territory. After soaring a staggering 5.2% in the prior period, the Hang Seng index (.HSI) increased by 2.5%.
Nikkei (.N225) in Japan fell 0.1%.
A survey released overnight revealed that U.S. job postings surprisingly increased in September, indicating that the labour market is still in high demand despite rate increases. Treasury yields reversed course as a result, and market predictions for interest rates in 2019 increased to above 5%.
U.S. stocks ended the day lower as the Dow Jones Industrial Average (.DJI), S&P 500 (.SPX), and Nasdaq Composite (.IXIC) all declined.
The dollar weakened 0.2% versus a group of major currencies on the currency market. Against the Japanese yen, it decreased by 0.5% to 147.6 yen on concerns about government intervention and low liquidity.
A change to the central bank’s yield curves control strategy, which has exacerbated the yen’s decline, may be considered in the future, according to Bank of Japan Governor Haruhiko Kuroda.
On the belief that the Fed might be signalling a halt in its ferocious tightening drive, the safe-haven dollar gave up some of its quick profits this year in October.