Asian equity markets are poised for a negative session, echoing a global risk-averse sentiment. This follows Wall Street‘s downturn due to an unforeseen rise in US job openings for August. Both stocks and bonds saw significant selling activity during the session. The surge in job openings intensified fears of a potential tightening in the labour market, prompting traders to shed risk assets, favour the USD, and sell off Treasuries.
In close succession to this development, the USD/JPY experienced a dramatic drop, its most significant since what many consider the last Yen intervention in October of the preceding year. The currency pair plunged nearly 300 pips within minutes after breaking past the 150 mark. Market participants will be keenly observing this level, awaiting further insights from Japanese officials about foreign exchange rates and possible shifts in monetary policy. This is particularly significant as fluctuations in US interest rates lead to rising yields in both G7 and emerging markets, potentially impacting existing monetary policy stances.
The USD and bond markets interplay will remain central to short-term price movements. It’s also important to highlight that with Chinese markets on a week-long holiday, trading liquidity will be limited. The financial community’s attention will largely be directed towards the upcoming US Non-Farm Payroll (NFP) data due this Friday. Before this, today’s focus will be on the US ISM Non-Manufacturing data and ADP National Employment figures. Should these indicators surpass expectations, especially by a significant margin, it may reinforce concerns about a heated labour market. This could subsequently prompt a reassessment of the Federal Reserve’s year-end funds rate and the subsequent week’s rate forecast, which could force participants to sell risk assets as equities and EM assets.
