Asian equity markets brace for potential volatility as a dampened global risk appetite loom, sparked by the announcement from Fitch Ratings that the US’ ‘AAA’ rating is now under negative watch. This development raises the spectre of a possible downgrade from the top-tier credit rating, fuelled by the persistent deadlock over the US debt ceiling and the looming threat of a US default. These concerns have stoked market volatility and instilled caution among rating agencies and investors. Yet, despite these headwinds, elements of optimism surface amid the uncertainty. US House Speaker McCarthy provided a glimmer of hope, indicating that a debt agreement in principle could be realized over the upcoming weekend, somewhat counterbalancing the prevailing negative market sentiment.
On the monetary policy landscape, market participants are mulling over the recent US FOMC Minutes. The minutes revealed a division among officials about the necessity of further rate hikes, adding a layer of complexity to the market dynamics. Fed Governor Waller stressed the importance of forthcoming US data in shaping the committee’s projections for the US terminal rate. Consequently, attention is now pivoting towards several key US economic indicators set for release. Today’s data slate includes the second estimate of the US Q1 GDP, jobless claims, and pending home sales data, while the US Core PCE Price Index data, a significant factor in the Fed’s June decision-making, is scheduled for release tomorrow. These crucial data points will be closely scrutinized by traders and investors for insights into the trajectory of the US economy and the potential direction of monetary policy.
