Fed rate speculation rattles Asia market ahead of jobs report

March 07, 2024 (MLN): Equities fluctuated in Asian trade Thursday as investors tried to assess the Federal Reserve's plans for interest rates after boss Jerome Powell indicated they would start to come down this year, as APP reported. 

Focus is also on the release of key US jobs data due Friday, following a positive set of figures showing the labour market remained healthy but appeared to be softening.

Meanwhile, gold and bitcoin were essentially flat after edging back from record highs earlier in the week.

In closely watched testimony before lawmakers Wednesday, Powell flagged progress on bringing inflation towards the Fed's 2% goal and said borrowing costs could be lowered as a result.

He warned that the battle was far from over, while investors are eyeing a first move in June after their March hopes were scrubbed by a strong inflation report last month.

"If the economy evolves broadly as expected, it will likely be appropriate to begin dialling back policy restraint at some point this year," he told the House Financial Services Committee. 

"But the economic outlook is uncertain, and ongoing progress toward our 2% inflation objective is not assured," he added.

While prices have been tempered by the Fed's decision to push rates to a two-decade high, officials have lined up to warn that cutting them too early could erase all their hard work.

Powell's remarks saw all three main indexes rise on Wednesday, and Asian traders battled to maintain the positive momentum.

Shanghai, Sydney, Seoul, Taipei, Jakarta and Wellington all rose, though Hong Kong and Tokyo swung between gains and losses.

"Powell stuck to the script. The January inflation blip hasn't shifted the broader calculus much and Chair Powell did little to break from recent Fed commentary," said National Australia Bank's Taylor Nugent.

Jose Torres at Interactive Brokers added that "his positivity concerning the trajectory of inflation amidst confidence that the central bank's current rate is likely at its peak is enough for market participants".

Traders are also keeping an eye on a policy meeting of the European Central Bank later Thursday, which is not expected to see any movement but investors are hoping for some guidance.

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