By Ankur Banerjee
SINGAPORE (Reuters) – Gold prices surged to a record high, and the dollar strengthened on Wednesday, exerting pressure on the yen and the euro. Asian stocks were tepid as investors hesitated to make significant moves ahead of the fiercely contested U.S. election.
The evolving expectations regarding the pace and extent of the Federal Reserve’s rate cuts have dampened risk sentiment. Traders are now expecting the U.S. central bank to take a cautious approach to easing.
This shift has driven U.S. Treasury yields to a three-month high and pushed the dollar to multi-month peaks against the euro, British pound, and the yen, which has returned to levels around 150 per dollar, prompting concerns from Japanese officials.
MSCI’s broadest index of Asia-Pacific shares outside Japan edged up by 0.06%. Tokyo’s Nikkei was marginally lower in early trading.
“Volatility within a range-bound trade is increasingly becoming the norm as markets brace for pivotal weeks ahead, including the U.S. presidential election and a heavy corporate earnings agenda,” said Anderson Alves, a trader with ActivTrades.
China and Hong Kong stocks opened steadily on Wednesday, buoyed by the promise of government support for the economy, allowing major indexes to settle at higher levels.
Additional Insight: The market’s shifting momentum towards a potential Donald Trump presidency has impacted investors. Trump’s proposed policies, such as tariffs and immigration restrictions, are expected to raise inflation, bolstering the dollar amid speculation that U.S. rates may stay relatively elevated for a longer period than previously anticipated.
Trump’s chances of defeating Vice President Kamala Harris, the Democratic candidate, have slightly increased on betting platforms, although opinion polls suggest the White House race remains too close to predict definitively.
With less than two weeks remaining until the Nov. 5 election, market participants are preparing for potential volatility.
The yield on benchmark U.S. 10-year notes stood at 4.216% in Asian hours after touching a three-month peak of 4.222% in the previous session.
Additional Insight: Prashant Newnaha, a senior Asia-Pacific rates strategist at TD Securities, noted, “The Treasury sell-off has intensified this week as markets acknowledge that the Fed risks stoking inflation if it eases into a robust economy. Trump’s improving election odds are also tempering market expectations for continued Fed easing into 2025, raising the possibility of the Fed pausing for six months next year.”
Currently, markets are factoring in 41 basis points (bps) of cuts for the year, with an additional 100 bps priced in for the following year.
By Ankur Banerjee
SINGAPORE (Reuters) – Gold prices surged to a record high, and the dollar strengthened on Wednesday, exerting pressure on the yen and the euro. Asian stocks were tepid as investors hesitated to make significant moves ahead of the fiercely contested U.S. election.
The evolving expectations regarding the pace and extent of the Federal Reserve’s rate cuts have dampened risk sentiment. Traders are now expecting the U.S. central bank to take a cautious approach to easing.
This shift has driven U.S. Treasury yields to a three-month high and pushed the dollar to multi-month peaks against the euro, British pound, and the yen, which has returned to levels around 150 per dollar, prompting concerns from Japanese officials.
MSCI’s broadest index of Asia-Pacific shares outside Japan edged up by 0.06%. Tokyo’s Nikkei was marginally lower in early trading.
“Volatility within a range-bound trade is increasingly becoming the norm as markets brace for pivotal weeks ahead, including the U.S. presidential election and a heavy corporate earnings agenda,” said Anderson Alves, a trader with ActivTrades.
China and Hong Kong stocks opened steadily on Wednesday, buoyed by the promise of government support for the economy, allowing major indexes to settle at higher levels.
Additional Insight: The market’s shifting momentum towards a potential Donald Trump presidency has impacted investors. Trump’s proposed policies, such as tariffs and immigration restrictions, are expected to raise inflation, bolstering the dollar amid speculation that U.S. rates may stay relatively elevated for a longer period than previously anticipated.
Trump’s chances of defeating Vice President Kamala Harris, the Democratic candidate, have slightly increased on betting platforms, although opinion polls suggest the White House race remains too close to predict definitively.
With less than two weeks remaining until the Nov. 5 election, market participants are preparing for potential volatility.
The yield on benchmark U.S. 10-year notes stood at 4.216% in Asian hours after touching a three-month peak of 4.222% in the previous session.
Additional Insight: Prashant Newnaha, a senior Asia-Pacific rates strategist at TD Securities, noted, “The Treasury sell-off has intensified this week as markets acknowledge that the Fed risks stoking inflation if it eases into a robust economy. Trump’s improving election odds are also tempering market expectations for continued Fed easing into 2025, raising the possibility of the Fed pausing for six months next year.”
Currently, markets are factoring in 41 basis points (bps) of cuts for the year, with an additional 100 bps priced in for the following year.
