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Hang Seng Index futures closed up 1.25% at 19,841 points in the night session, 257 points higher than the previous session.Congressional Budget Office (CBO): The cost of clean energy subsidies in the inflation-proof bill is now expected to be $825 billion between 2025 and 2035, compared with an estimated cost of $270 billion between 2022 and 2031.The Federal Reserve accepted a total of $118.327 billion from 32 counterparties in fixed-rate reverse repurchase operations.The Federal Aviation Administration (FAA) said it was working with SpaceX and relevant authorities to confirm reports of damage to public property in the Turks and Caicos Islands.Futures traders are adjusting their bets in the Treasury market after mild inflation data and dovish comments from a Federal Reserve official. Over the past two days, the volume of open interest has changed, consistent with traders exiting short positions in two-year Treasury bonds and establishing new long positions in longer-term Treasury contracts, especially in the five-year Treasury. The shift came after consumer price inflation data released on Wednesday and comments made by Federal Reserve Governor Christopher Waller the next day. Data released on Wednesday showed that core price increases in December were lower than economists expected; Waller said that if the trend continues, officials may cut interest rates again in the middle of the year. Morgan Stanleys interest rate strategists suggested late Thursday that long positions could be established in Treasury bonds of this term given expectations that the Federal Reserve will cut interest rates in March, but this is still a minority view. The swap market expects only a 6 basis point rate cut in March, which means there is about a 25% chance of a 25 basis point cut. “We haven’t ruled out a rate cut in March, but we do see it as more of a tail risk,” said Stephanie LaRosiliere, head of fixed income strategy at Invesco. “It doesn’t feel like the Fed needs to react so hastily.”

AUD/USD Falls Toward 0.7000 as Weak China Data Increases RBA and Fed Concerns

Daniel Rogers

Feb 01, 2023 15:36

 AUD:USD.png

 

AUD/USD accepts offers to re-establish intraday low at 0.7040 as market nervousness deepens ahead of Wednesday morning's critical Fed announcement. The Chinese activity statistics provided by the industry group may support the retreat moves.

 

However, China's Caixin Manufacturing PMI rose from 49.0 to 49.2, falling shy of market estimates of 49.5. Additionally, the sixth consecutive month of readings below 50 reinforces the negative outlook on Australia's largest consumer.

 

The head of the RBA's Economic Analysis Department, Marion Kohler, stated elsewhere that the bank expects inflation to peak in the fourth quarter of 2022. In contrast, the Wall Street Journal's James Glynn projected that the RBA will deliver a series of rate hikes and retain its aggressive stance at the monetary policy meeting next week.

 

Despite fading inflation fears and persistent recession worries, traders are preparing for today's critical Federal Open Market Committee (FOMC) monetary policy meeting. Despite recent poor inflation numbers, Fed Chair Jerome Powell's hawkish approach and readiness to defend quick rate hikes make today's Fed meeting intriguing.

 

In this scenario, S&P 500 Futures register moderate losses, while US Treasury bond yields remain sluggish and arrest their slide from yesterday. The US Dollar Index (DXY) receives bids near 102.15 in an attempt to recoup Tuesday's losses.


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