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Daily Market Briefing, Asia Pacific

21 Mar 2023

All eyes on the US Fed

• Positive vibes. Equities and bond yields are higher as sentiment regarding the banking situation continues to improve.• US Fed in focus. While a case can be made for the Fed to hold steady, we think it is more likely that it delivers another 25bp hike. And continues to stress that ‘restrictive’ settings will be needed for some time.• AUD underperformer. Comments that the RBA will “reconsider” a pause in April have weighed on the AUD. Policy divergence can keep the AUD on the backfoot. Risk sentiment has continued to recover. The recent moves by authorities to support the banking...

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20 Mar 2023

Calm before the Fed storm?

• Intra-day vol. Equity and bond markets have whipped around over the past 24hrs in response to the UBS/Credit Suisse deal. In the end risk appetite improved.• Fed in focus. Measures deployed to suppress contagion risks should keep the door open for the Fed to hike rates again in its fight against inflation.• AUD near a 2-week high. Positive risk sentiment can support the AUD further near-term, but the Fed decision could see it fall back later this week. Markets continue to experience intra-day volatility, with global banking developments still centerstage. The news that UBS is buying Credit Suisse was...

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19 Mar 2023

Will the US Fed hike rates again?

• Market turbulence. Banking developments continue to drive markets. Will the UBS/Credit Suisse news act as a circuit breaker?• Fed in focus. The US Fed meets later this week. Despite the banking issues, high inflation still points to the Fed hiking by another 25bps, in our view.• AUD volatility. AUD has edged higher recently. Another Fed rate hike and a relatively ‘hawkish’ message could see the USD bounce back. Developments in the global banking system continue to drive markets. It has been a tumultuous week, with fears of bank contagion weighing on risk appetite once again on Friday. More regional...

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14 Mar 2023

Past the worst?

• Risk sentiment improves. Equites and bond yields bounced back overnight, but the moves in FX have been more contained.• US inflation. Core inflation remains stubbornly high. Services prices remain the key driver. This points to further Fed rate hikes and a USD rebound.• AUD data flow. China data is released today. Tomorrow, the Australian labour force report is due. Positive data may give the AUD a short-term boost. After a few turbulent days the tone across markets was more positive overnight, though reports late in the session that a Russian fighter jet collided with a US drone did see...

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13 Mar 2023

Radical Rate Repricing

• Bond yield plunge. Extreme moves in bonds with US yields falling sharply (2yr down another ~60bps) as the Fed rate outlook is radically repriced.• Weaker USD. The adjustment has weighed on the USD. AUD is higher, though it is little changed on the crosses, illustrating how USD-centric it has been.• US CPI. Markets may have moved too far when it comes to Fed expectations. US CPI released tonight, another strong result could generate more volatility. The turmoil stemming from the US regional banking issues has continued despite efforts from authorities to try and contain contagion and macroeconomic risks. In...

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