Asian equities could trade on the backfoot as Wall Street peers were under pressure ahead of the US Consumer Price Index data. The tech sector was the most affected due to outflows from the big tech stocks and semiconductors, with guidance for revenue weighting on price action ahead of challenging costs pressures and supply/demand issues in the coming quarters.
On the macro front, with tight liquidity due to summer, traders will be watching the price action in the FX space as the US dollar index was flat before the major US CPI event. If the data continues to show consistent inflationary pressures, markets could again turn the focus to reprice the current bets on the Fed policy. Early today, Fed’s Bullard said that “the Fed will be prepared to hold interest rates higher for longer and market pricing will need to adjust accordingly”. Participants will also be keeping a close eye on China’s CPI and PPI, as data could start showing renewed signs of price pressures on both fronts. If data points higher, it could compel the PBoC to guide the monetary policy to a more neutral policy instead of adopting a dovish stance as it was somewhat a market consensus in the last quarter.
