Market Focus: Impacts of Fed Decisions on Asian Economies

Explore the latest insights of Fed decisions on Asian economies. Analyze market reactions post-FOMC, key economic indicators, and central bank policies affecting currencies like the AUD, JPY, and NZD, as well as commodities such as gold and oil.

U.S. Session Overview

In the aftermath of the Wednesday Federal Open Market Committee (FOMC) meeting, Patrick Harker, President of the Federal Reserve Bank of Philadelphia, delivered remarks at Tulane University. His discussion encompassed topics such as maximum employment, the ramifications of student loans, and the FedNow® Service—a new platform for instant payments. Notably absent were explicit forecasts regarding future monetary policy. So, the U.S. dollar index (DXY) fluctuated between 100.60 and 101.01, closing the session at 100.73 on Friday.

Implications for the Asia Session

Japan’s financial markets will be closed today in observance of the Autumn Equinox, likely resulting in reduced trading volume during Asian hours. Following last week’s monetary policy announcements from the Bank of Japan (BoJ), the yen experienced significant depreciation after Governor Kazuo Ueda indicated that “the situation remains unstable” and that further rate hikes are distant.

Australia’s Composite PMI showed contraction for the second time in three months, with a flash reading of 49.8 for September. The manufacturing sector’s contraction persisted for an eighth consecutive month, with a low reading of 46.7—marking the weakest since May 2020. Conversely, services activity continued to expand for the eighth straight month, albeit at a slower pace. Despite the sluggish PMI readings, the Australian dollar maintained support above 0.6815 this morning.

Dollar Index (DXY) Outlook

Key news events today include the Composite PMI at 1:45 PM GMT. Robust PMI activity in the U.S. over the last four months, primarily driven by the services sector, points to another month of manufacturing contraction. A stronger PMI reading could be a near-term bullish catalyst for the dollar.

Central Bank Highlights:

• On September 18, the Federal Funds Rate was reduced to a target range of 4.75% to 5.00%, reflecting an 11-1 vote.
• The Fed aims for maximum employment and a long-term inflation rate of 2%.
• The economic outlook remains uncertain, with the Committee vigilant regarding inflation and employment risks.
• Ongoing reductions in Treasury securities and agency debt are part of the Fed’s strategy.

Next 24 Hours Bias: Weak, Bullish

Market Focus: Impacts of Fed Decisions on Asian Economies

Gold (XAU) Outlook

With the Composite PMI data due, a strong PMI could bolster the dollar, exerting downward pressure on gold prices.

Next 24 Hours Bias: Weak Bearish

Australian Dollar (AUD) Outlook

Australia’s Composite PMI has contracted again, driven mainly by manufacturing. Despite this, the Australian dollar remains resilient above 0.6815.

Next 24 Hours Bias: Weak, Bullish

New Zealand Dollar (NZD) Outlook

With U.S. dollar bears regaining momentum, the Kiwi gained 1.3% last week. At the start of the Asia session, it was trading around 0.6235, with key support at 0.6120 and resistance at 0.6300.

Next 24 Hours Bias: Weak, Bullish

Japanese Yen (JPY) Outlook

Japan’s markets are closed today, potentially leading to lighter trading. Following recent BoJ statements, the yen has weakened considerably, with USD/JPY trading around 144.35.

Next 24 Hours Bias: Medium Bullish

Euro (EUR) Outlook

The Euro Area’s manufacturing activity remains in contraction, but services are stabilizing. A weaker PMI reading may weigh on the euro during European trading hours.

Next 24 Hours Bias: Weak Bearish

Swiss Franc (CHF) Outlook

Following the FOMC meeting, the franc showed slight losses against the dollar. It was trading around 0.8510, with support at 0.8430 and resistance at 0.8560.

Next 24 Hours Bias: Weak, Bullish

Pound (GBP) Outlook

Expectations are that the U.K. PMI will show robust activity, and a stronger-than-anticipated reading could lift the pound during European hours.

Next 24 Hours Bias: Weak Bearish

Canadian Dollar (CAD) Outlook

Furthermore, with crude oil prices rebounding, the Loonie has gained ground, trading around 1.3560 with support at 1.3490 and resistance at 1.3650.

Next 24 Hours Bias: Weak, Bullish

Oil Outlook

Crude oil prices rebounded last week, driven by OPEC+ production cuts. However, concerns over global demand persist, and the price is trading around resistance at $72.00.

Next 24 Hours Bias: Weak, Bullish

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