Asian equities could trade on the back foot following US stock‘s defensive price action as it closed with mild losses yesterday. Participants remained cautious before the release of US inflation data and amid ongoing negotiations over the US debt ceiling. The US dollar traded high, and with the short-term US rates, it could be one of the best macro drivers ahead of the release of US CPI data later today, with the Federal Reserve indicating that it is prepared to raise interest rates again if needed.
According to consensus estimates, core CPI inflation is expected to have risen by 0.3% month-on-month in April, with used cars seen as one of the main drivers of the increase. However, some partially offsetting factors are also expected. For core services, a slight re-acceleration in key rent measures is expected, while non-housing price pressures are seen moderating. The market currently views the Fed’s recent interest rate hike as the last of the cycle, with a reversal of the move expected in September. However, market reaction is expected to be skewed in the event of a miss.
