The Asian equity markets responded to the overnight FOMC economic projections and Fed Chair Powell press conference. On Thursday, the Hang Seng Index led the Nikkei and the ASX 200 into positive territory. The FOMC projected a median 2024 Fed Funds rate of 4.6%, unchanged from December. Significantly, the Fed expected three rate cuts in 2024, driving demand for riskier assets.
The Hang Seng Index was up 1.92% to 16,860 in the morning session, with the ASX 200 and Nikkei up 0.53% and 1.18%, respectively. Significantly, the Nikkei retook the 40,000 handle despite a weaker USD/JPY.
On Thursday, Australian labor market data for February could influence the RBA interest rate trajectory. The Australian unemployment rate fell from 4.1% to 3.7%. Economists forecast an unemployment rate of 4.0%.
According to the Australian Bureau of Statistics,
The sharp fall in the Australian unemployment rate could support wage growth and increase disposable income. Upward trends in disposable income may fuel consumer spending and demand-driven inflation. The RBA could respond to a pickup in consumption by raising the cash rate to dampen inflationary pressures.
The AUD/USD reacted to the upbeat numbers, rising from $0.65902 to a Thursday session high of $0.66238. On Thursday, the Aussie dollar was up 0.46% to $0.66163.
The Jibun Services PMI increased from 52.9 to 54.9 in March. Economists forecast an increase to 53.4.
According to the preliminary survey,
Service sector activity is a focal point for the Bank of Japan. The Bank of Japan recently discussed the need for the services sector to fuel demand-driven inflationary pressures.
The USD/JPY reacted to the Service PMI numbers, rising to a high of 150.865 before falling to a low of 150.261.
On Thursday, the USD/JPY was down 0.56% to 150.409.
With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.