Asian equities might trade under pressure as global equities sold off after hawkish price action around Fed Chair Powell’s comments on US Congress yesterday. His remarks brought traders back to the table a potential 50bps rate hike and higher terminal rate ahead of the March 22nd FOMC meeting. Fed Chair will speak later today, and traders will watch if he reinforces the hawkish rhetoric or pushes it back after the market reaction. For risk assets price action, it is worth noting that market positioning could be stretched as this will be his last speech as the Fed enters a media blackout regarding policy this Friday at midnight. Fed Chair noted recent macro data, while possibly related to seasonal adjustments, suggest the Committee might have to raise rates higher than expected. Data between now and the March meeting is very important, so traders will be monitoring closely the US Nonfarm Payroll this week and US Consumer Price Index next week.
In China, equities might be under pressure. China Dragon Index ETF trade in the US fell by -3.01%. The focus remains on China’s NPC with quite hawkish statements directed towards the US from new Foreign Minister Qin Wang that tensions risk blowing past any guardrails in the relationship. President XI also said the country is grappling with containment from western countries led by the US. Friday’s Bank of Japan meeting is also arriving at price action sight. No major changes are expected in what will be Kuroda’s last meeting. But any hawkish surprise in the meeting could hit risk assets due to short-term repricing and lift the JPY, indicating that positioning for the event in the coming session could be high.
