Asian markets declined on Wednesday as investors awaited a US inflation report that could impact the Federal Reserve’s plans for interest rate adjustments, Reuters reported. The New Zealand dollar also fell after the central bank softened its stance.
The MSCI Asia Pacific index outside Japan fell 0.44 per cent at 525.40 points, close to a seven-month high of 531.56. This marks a 4.4 per cent increase for the month, the strongest February performance in over a decade.
European markets are expected to follow a similar trend, with Eurostoxx 50 futures down 0.12 per cent and German DAX futures up 0.06 per cent, the statement added.
Investors are closely watching the personal consumption expenditures price index (PCE) for January, the Fed’s preferred inflation measure, which is expected to show a 0.3 per cent increase from December.
Strong economic data and persistent inflation have led traders to revise their expectations for early and aggressive interest rate cuts by the Fed. The easing cycle is now anticipated to begin in June, compared to initial expectations for March.
Traders now expect a total of 77 basis points of cuts this year, down from 150 bps at the start of the year.
Yuting Shao, macro strategist at State Street Global Markets, emphasised the significance of individual data releases for the Fed’s decision-making and their impact on market sentiment.
Other key data releases this week from the Fed include the second estimate of gross domestic product, jobless claims, and manufacturing activity.
Recent comments from Fed policymakers, including Governor Michelle Bowman, have also indicated a reluctance to cut rates too early, citing potential upside risks to inflation that could hinder progress or lead to a resurgence of price pressures.
