Marketmind: Powell spoke – bullish or bearish?

By Jamie McGeever

(Reuters) – A look ahead for the day ahead in Asian markets by Jamie McGeever.

Fed Chair Jerome Powell has spoken and luckily for bulls and bears there was something for everyone so it’s a coin toss as to where Asian markets are headed on Wednesday.

With an expected rate hike in India taking regional focus, investors in Asia will digest the mixed US picture, which saw stocks rise but the dollar and Treasuries fell on Tuesday.

Wall Street was boosted and the dollar was boosted by Powell’s reluctance – yes, refusal – to say that January’s blowout jobs data inevitably means interest rates must be higher than what Fed officials had estimated late last year .

But he also said “it will take time” to get the inflationary spirit back in the 2% bottle. Bond prices slipped, yield curves steepened, the expected ‘final rate’ remained at 5.15% and the level of implied monetary easing this year stabilized at around 15 basis points.

The Reserve Bank of India is likely to hike interest rates by 25 basis points to 6.50% in what most economists believe will be the last of the hike cycle.

More than three-quarters of the 52 economists polled by Reuters last month expect a quarter-point rise and 12 forecast no change. But beware of surprises, as the Australian central bank showed on Tuesday.

The Indian rupee enters the session at a one-month low against the dollar, squeezed by the interest rate outlook and battered by the Adani Group’s financial crisis, which has turned into a political crisis.

It was announced on Tuesday that the group is considering an independent assessment of regulatory compliance issues, related party transactions and internal controls after a US short seller’s critical report of its trades resulted in a loss of over US$110 billion. dollars in the market value of the group.

Adani was given a reprieve after JP Morgan said the group’s companies are still eligible for inclusion in the bank’s influential bond indexes, while rating agencies say Indian banks’ credit profiles are safe.

However, with the rupee just a hair away from the October record low, traders will be braced for intervention alerts from the RBI.

Elsewhere in regional FX, the Aussie dollar has seen a bounce in its stride after Australia’s central bank hiked interest rates to a decade high on Tuesday, signaling it could tighten more than markets had anticipated.

The yen also shot higher on Tuesday, posting a severe two-day slide after strong wage growth data. December current account numbers are next due on Wednesday.

Here are three key developments that could give markets more direction on Wednesday:

– Interest rate decision in India

– Japan current account (December)

– Fed’s Williams, Cook, Bostic, Barr, Kashkari and Waller all speak

(By Jamie McGeever; Editing by Lisa Shumaker)

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