- Asian stocks cheer Powell’s readinness to cut rates and the overnnight rally in the US stocks.
- Gold rally seems to have paused but the risk reset in equities is struggling to put a bid under USD/JPY.
Asian stocks have picked up a bid this Wednesday morning, possibly in response to Federal Reserve Chairman Jerome Powell’s comments that the Fed would act if the escalating trade tensions have a negative impact on the economy.
At press time, Japan’s Nikkei is reporting a 1.86% rise. Stocks in South Korea, Hong Kong, and Australia are reporting moderate gains. Meanwhile, the Shanghai Composite index has added 0.35%.
The US stocks on Tuesday surged by most since January with the Dow Jones Industrial Average gaining 500 points on Powell’s readiness to act if required.
The Fed would “act as appropriate to sustain the expansion” amid the economic impact of escalating trade wars, Chairman Powell said on Tuesday. Further, James Bullard, president of the Federal Reserve Bank of St Louis and a voting member of the committee, said that a rate cut might be “warranted soon,” and that current interest rates might be “inappropriately high”.
Meanwhile, Mexican officials added to the relief, further strengthening the bid tone around the US stocks by stating that they expect to avoid Trump administration tariffs.
However, the risk reset in both the US and Asian stocks has failed to weaken the demand for the anti-risk JPY. This is evident from the 0.10% drop in USD/JPY seen at press time.
Gold rally, however, seems to have stalled near $1,330 with signs of bullish exhaustion emerging in the form of a doji candle on the daily chart.
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