Asian equities could trade a mild positive after a somewhat dovish reaction after the FOMC meeting as it didn’t throw in any hawkish surprises. Though acknowledged it was a risk, Fed Chair Powell sounded unconcerned about COVID Omicron’s impact. Though he noted, it could impact supply as well as demand. For Central Bank traders, Fed Powell provided an interesting insight into the FOMC’s decision-making process to call for a faster bond tapering as part of a coordinated communications effort.
On the radar for the session ahead, it could be hard to state that the ‘dovish’ Fed reaction seen on Wall Street risk assets could support any meaningful risk-on flows on Asian peers. Liquidity will remain thin and price action could stay mixed due to the last major index and options expiry on Friday, the Quadruple Witching and the last trading day of the year weeks ahead. It is worth noting that Omicron infections are growing faster in many parts of Europe, the UK, South Africa and South Korea. The full impact of the new variant on multiple themes such as vaccines and global supply chains is not yet clear. So participants could hold their exposure and release some positioning next week after more data on COVID and technical plays after the option expiry on Friday.
