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Asia morning update - Fed Powell dovishness

Muted movements are again anticipated for Asia markets with expected Fed dovishness seen and the lack of fresh leads particularly on trade. More of the same is due midweek, awaiting the data releases into the end of the week.

Wall Street was seen treading lightly in Tuesday’s session with the sentiment suggesting the reluctance to err on either side without further details on trade, the overshadowing factor moving markets at present. Both the Dow and the S&P 500 index concluded near neutral at -0.13% and -0.08% respectively, with the latter putting up a good fight against the 2800 resistance in the session.

Notably, we did have Federal Reserve chair Jerome Powell in his testimony affirming the patient stance towards interest rate hikes that remained supportive for markets. While emphasizing the US economy’s healthy outlook, there had again been mentions of the external headwinds including the slowdown seen in China and Europe, and uncertainty surrounding trade warranting caution from the Fed. The view towards inflation had also been one championing the expected stagnant rates to come, with the Fed chair citing inflation pressures as ‘muted’. Such a view can be seen shared by the US economy as evident in the latest reading from the latest February conference board consumer confidence report. Speaking of which, despite the rebound of the consumer confidence index to 131.4, balancing some of the gloom stemming from the recent retail sales release, the market is clearly distracted by the likes of trade.

Separately on Brexit, it is worth noting that with the latest turn in the UK, the diminishing likelihood on a no-deal Brexit can be seen opening up room for strengthening of the currency. GBP/USD touched a fresh five-month high yesterday, breaking up firmly to trade above $1.32 as the likelihood of a delay to the March 29 deadline increases. Prices had been oscillating mostly around $1.13 level of late, taking a midpoint between the post Brexit lows of around $1.12 where support came in strong and the pre-referendum $1.14 trade amid the uncertainties. With Prime Minster Theresa May’s latest offering of a delay vote, prices can be seen moving north and perhaps in an offshoot possibility that a no-Brexit happens, the $1.14 level should be where we set our eyes upon.

On Asia markets, expect the lacklustre trade to sustain once again evidently with the lack of novel market-moving developments in the picture. Other than Hong Kong’ Q4 GDP, it is expected to again be a quiet Asia session though with the Trump-Kim summit humming on in the background that would be more prevalent for politics. Eurozone sentiment numbers up next ahead of the final reading for durable goods, but otherwise it will be a second day watching Fed Powell’s testimony to the House.

Yesterday: S&P 500 -0.08%; DJIA -0.13%; DAX +0.31%; FTSE -0.45%

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