Asia stocks cautiously advance.
Most Asian stocks rose on Friday, although gains were muted as investors hunkered down in anticipation of more cues on U.S. interest rates from an upcoming address by Federal Reserve Chair Jerome Powell.
Japanese shares were a mixed bag as consumer inflation data for July showed price growth remaining well above the Bank of Japan’s annual target, a trend that could push the bank into raising interest rates further.
Regional markets took middling cues from a negative session on Wall Street, as technology shares continued to decline, while mixed earnings from Walmart (NYSE:WMT) also weighed.
S&P 500 Futures were mildly higher in Asian trade, with focus chiefly on Powell’s address at the Jackson Hole Symposium later in the day. His speech comes amid growing doubts over whether the Fed will cut interest rates in September, especially after the minutes of the central bank’s July meeting struck a hawkish note.
Gold prices drop.
Gold prices fell in Asian trade on Friday, remaining under pressure from a stronger dollar as investors scaled back bets on more U.S. interest rate cuts before a hotly anticipated address from Federal Reserve Chair Jerome Powell.
Broader metal prices also retreated, as the dollar firmed in anticipation of Powell. The greenback was also set for strong weekly gains.
But losses in gold were limited by some safe haven demand remaining in play, amid increasing signs that a Russia-Ukraine peace treaty will not be reached anytime soon, despite U.S. efforts at negotiation.
Gold heads for second week of losses as rate cut bets wane
Gold prices were trading down between 0.2% and 0.5% this week, and were headed for a second consecutive week of losses.
This came chiefly as traders dialed down expectations that the Fed will cut interest rates in September. The minutes of the central bank’s late-July meeting, which were released on Wednesday, also showed a bulk of policymakers supporting a hold in the near-term.
Dollar firms as traders rethink rate cut bets.
The U.S. dollar firmed on Friday and was poised for a strong weekly performance as investors reassessed rate cut wagers ahead of an eagerly anticipated speech from Federal Reserve Chair Jerome Powell that could shape the near-term monetary policy path.
A soft July jobs report coupled with big downward revisions to hiring in May and June bolstered hopes of an imminent reduction in borrowing costs, with traders at one point even pricing in a jumbo rate cut for the next meeting in September.
But since then cautious comments from other policymakers and economic data flashing inflationary risks have tempered those expectations. Traders are now pricing in a 75% chance of a 25-basis-point rate cut in September, down from 92% a week earlier, CME FedWatch tool showed.
Fed officials appeared lukewarm on Thursday to the idea of a rate cut next month, setting the stage for Powell’s speech at the annual Jackson Hole conference in Wyoming, which kicked off on Thursday.
“Powell is unlikely to pre-commit to a September cut,” said Charu Chanana, chief investment strategist at Saxo. “The Fed has a dual mandate, but right now inflation outweighs labour as the bigger risk.”
“With another inflation and payrolls print still due before the September meeting, Powell has every reason to stay patient and keep optionality open,” Chanana said.
That might leave the dollar vulnerable after a steady but unspectacular rise in the past week.
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